As If or What? - Expectations and Optimization in a Simple Macroeconomic Environment

Roos, Michael; Luhan, Wolfgang J.

doi:10.2139/ssrn.1240763

Cited by 2 publications

(1 citation statement)

References 26 publications

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“…Of course, the choice behaviour of subjects is as interesting as the formation of expectations, but this is analysed in a companion paper (Roos and Luhan ). In that paper we find that subjects' perceptions of the model relationships are fairly accurate, but perceptions of other subjects' behaviour are biased.…”

Section: Introductionmentioning

confidence: 99%

Information, Learning and Expectations in an Experimental Model Economy

Roos

Luhan

2012

Economica

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The experimental 'learning-to-forecast' literature finds that subjects use simple linear backward-looking models when forecasting in environments with little to no inout the economic framework. We study the formation of expectations in a laboratory economy of monopolistic firms and labour unions with almost complete knowledge of the model. We observe simple backward-looking rules, but also a considerable share of model-based expectations using information on the economic structure. At least for some subjects, expectations are informed by theory. As in the previous literature, we find individual prediction rules to be heterogeneous. INFORMATION, LEARNING AND EXPECTATIONS NotesEntries are fixed effects, with robust standard errors (Driscoll-Kraay) given in parentheses. Ã , ÃÃ indicate significance at the 5%, 1% level, respectively. Economica 522 ECONOMICA [JULY NotesRobust standard errors (Driscoll-Kraay) are given in parentheses. p(F) is the significance level of the F-test onq 0 ¼ 0 andq 1 ¼ 1. Ã , ÃÃ indicate significant difference fromq 0 ¼ 0 andq 1 ¼ 1 in the t-test at the 5%, 1% level, respectively. Economica

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Section: Introductionmentioning

confidence: 99%

Information, Learning and Expectations in an Experimental Model Economy

Roos

Luhan

2012

Economica

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Are Expectations Formed by the Anchoring-and-Adjustment Heuristic? - An Experimental Investigation

Roos

Luhan

2008

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The working papers published in the Series constitute work in progress circulated to stimulate discussion and critical comments. Views expressed represent exclusively the authors' own opinions and do not necessarily reflect those of the editors. Abstract Previous experimental investigations have shown that expectations are not perfectly rational due to bias. Traditional adaptive models, however, in many cases do not perfectly describe the formation of expectations either. This paper makes two contributions to the experimental literature on the formation of expectations: First, we investigate whether subjects who have more information about the economic model than in previous studies also form biased expectations. Second, we argue that in some cases macroeconomic expectations might be formed by the anchoring-and-adjustment heuristic, which is well known in psychology. We find that subjects' expectations are biased although the design might be more favorable to rational expectations. The anchoring-and-adjustment model of expectations gets some support by our data, but the best model encompasses both the anchoring-and-adjustment model and the traditional adaptive model. JEL Classification: D84, D83, C99 Terms of use: Documents in

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As If or What? - Expectations and Optimization in a Simple Macroeconomic Environment

Cited by 2 publications

References 26 publications

Information, Learning and Expectations in an Experimental Model Economy

Information, Learning and Expectations in an Experimental Model Economy

Are Expectations Formed by the Anchoring-and-Adjustment Heuristic? - An Experimental Investigation

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