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Rational Expectations in the Classroom: A Learning Activity

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  • Calvin Blackwell

Abstract

The author describes a technique whereby students truthfully reveal their perceptions regarding the difficulty of an assignment. After completing the assignment, each student guesses his/her class' average score on the assignment. The student is informed that if his/her guess is within one percentage point of the actual class average, then he/she will earn two extra points on the assignment. This mechanism gives each student the incentive to truly express his/her opinion regarding the difficulty of the assignment. The author provides evidence that students, as a group, are quite adept at guessing the class average. In addition to its usefulness in explaining the rational expectations hypothesis, this activity is helpful for assessing the students' perceptions of the difficulty of particular assignments.

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File URL: http://frank.mtsu.edu/~jee/2010/fall/1pp1to6_MS109.pdf
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Bibliographic Info

Article provided by Middle Tennessee State University, Business and Economic Research Center in its journal Journal for Economic Educators.

Volume (Year): 10 (2010)
Issue (Month): 2 (Fall)
Pages: 1-6

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Handle: RePEc:mts:jrnlee:v:10:y:2010:i:2:p:1-6

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Web page: http://www.mtsu.edu/~jee
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Related research

Keywords: teaching practices; rational expectations;

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References

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  1. Paul W. Grimes, 2002. "The Overconfident Principles of Economics Student: An Examination of a Metacognitive Skill," The Journal of Economic Education, Taylor & Francis Journals, vol. 33(1), pages 15-30, January.
  2. Ernst Fehr & Jean-Robert Tyran, 2005. "Individual Irrationality and Aggregate Outcomes," Discussion Papers 05-09, University of Copenhagen. Department of Economics.
  3. Gerald P. Dwyer, Jr. & Arlington W. Williams & Raymond Battalio & Timothy Mason, 1989. "Tests of rational expectations in a stark setting," Working Papers 1989-001, Federal Reserve Bank of St. Louis.
  4. Sheryl B. Ball & Charles A. Holt, 1998. "Classroom Games: Speculation and Bubbles in an Asset Market," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 207-218, Winter.
  5. Berg, Joyce E. & Nelson, Forrest D. & Rietz, Thomas A., 2008. "Prediction market accuracy in the long run," International Journal of Forecasting, Elsevier, vol. 24(2), pages 285-300.
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Cited by:
  1. Calvin Blackwell & Robert Pickford, 2011. "The wisdom of the few or the wisdom of the many? An indirect test of the marginal trader hypothesis," Journal of Economics and Finance, Springer, vol. 35(2), pages 164-180, April.

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