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Unbiased Adaptive Expectation Schemes

Author

Listed:
  • Antonio Palestrini

    (Università Politecnica delle Marche, Italy)

  • Mauro Gallegati

    (Università Politecnica delle Marche, Italy)

Abstract

There are situations in which the old-fashioned adaptive expectation process seems to provide a good description of agents' behavior (Chow, 2011). Unfortunately, this expectation scheme may not satisfy the necessary rationality condition (unconditional mean-zero error). This paper shows how to simply fix the problem introducing a bias correction term.

Suggested Citation

  • Antonio Palestrini & Mauro Gallegati, 2015. "Unbiased Adaptive Expectation Schemes," Economics Bulletin, AccessEcon, vol. 35(2), pages 1185-1190.
    • Handle: RePEc:ebl:ecbull:eb-14-00575
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    File URL: http://www.accessecon.com/Pubs/EB/2015/Volume35/EB-15-V35-I2-P122.pdf
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    References listed on IDEAS

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    1. repec:pri:cepsud:221chow is not listed on IDEAS
    2. Gregory C. Chow, 2011. "Usefulness of Adaptive and Rational Expectations in Economics," Working Papers 1334, Princeton University, Department of Economics, Center for Economic Policy Studies..
    3. Bhattacharya,Rabi & Majumdar,Mukul, 2007. "Random Dynamical Systems," Cambridge Books, Cambridge University Press, number 9780521825658.
    4. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    5. Gregory C. Chow, 2011. "Usefulness of Adaptive and Rational Expectations in Economics," Working Papers 1334, Princeton University, Department of Economics, Center for Economic Policy Studies..
    6. Tesfatsion, Leigh, 2006. "Agent-Based Computational Modeling and Macroeconomics," ISU General Staff Papers 200601010800001585, Iowa State University, Department of Economics.
    7. Bhattacharya,Rabi & Majumdar,Mukul, 2007. "Random Dynamical Systems," Cambridge Books, Cambridge University Press, number 9780521532723.
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    Citations

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    Cited by:

    1. Annarita COLASANTE & Antonio PALESTRINI & Alberto RUSSO & Mauro GALLEGATI, 2015. "Adaptive Expectations with Correction Bias: Evidence from the lab," Working Papers 409, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    2. Colasante, Annarita & Palestrini, Antonio & Russo, Alberto & Gallegati, Mauro, 2017. "Adaptive expectations versus rational expectations: Evidence from the lab," International Journal of Forecasting, Elsevier, vol. 33(4), pages 988-1006.
    3. Colasante, Annarita & Palestrini, Antonio & Russo, Alberto & Gallegati, Mauro, 2015. "Heterogeneous Adaptive Expectations and Coordination in a Learning-to-Forecast Experiment," MPRA Paper 66578, University Library of Munich, Germany.
    4. Fu, Jianhua & Zhang, Yongqing, 2020. "Valuation of travel time reliability: Considering the traveler's adaptive expectation with an indifference band on daily trip duration," Transportation Research Part A: Policy and Practice, Elsevier, vol. 140(C), pages 337-353.

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    More about this item

    Keywords

    Adaptive expectations; unbiased errors.;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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