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Private Experience in Adaptive Learning Models

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  • Felipe Perez-Marti

    (IESA, Caracas)

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    Abstract

    Experiments conducted by Marimon and Sunder as reported in Econometrica, 1993, show that people initially do not behave according to the rationally expectations assumption, but eventually learn to choose its low stationary steady state in a hyperinflationary world. We propose a slight generalization of the adaptive learning model in order to explain, beyond the long-run equilibrium observed, the erratic oscillations of the experimental variables. The introduction of heterogeneity in private experience in a simple adaptive model with fixed, deterministic, decision rules is shown to be necessary and sufficient to generate the complex dynamics present in the experiments. (Copyright: Elsevier)

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    File URL: http://dx.doi.org/10.1006/redy.1999.0083
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    Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

    Volume (Year): 3 (2000)
    Issue (Month): 2 (April)
    Pages: 283-310

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    Handle: RePEc:red:issued:v:3:y:2000:i:2:p:283-310

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    1. Chen Xiaohong & White Halbert, 2002. "Asymptotic Properties of Some Projection-based Robbins-Monro Procedures in a Hilbert Space," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, De Gruyter, vol. 6(1), pages 1-55, April.
    2. Simon, Herbert A, 1986. "Rationality in Psychology and Economics," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 59(4), pages S209-24, October.
    3. Chen, Xiaohong & White, Halbert, 1998. "Nonparametric Adaptive Learning with Feedback," Journal of Economic Theory, Elsevier, Elsevier, vol. 82(1), pages 190-222, September.
    4. Woodford, Michael, 1986. "Learning to Believe in Sunspots," Working Papers, C.V. Starr Center for Applied Economics, New York University 86-16, C.V. Starr Center for Applied Economics, New York University.
    5. Kalai, Ehud & Lehrer, Ehud, 1993. "Subjective Equilibrium in Repeated Games," Econometrica, Econometric Society, Econometric Society, vol. 61(5), pages 1231-40, September.
    6. Arifovic, Jasmina, 1995. "Genetic algorithms and inflationary economies," Journal of Monetary Economics, Elsevier, Elsevier, vol. 36(1), pages 219-243, August.
    7. Ehud Kalai & Ehud Lehrer, 1990. "Merging Economic Forecasts," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1035, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    8. Marimon, Ramon & Sunder, Shyam, 1993. "Indeterminacy of Equilibria in a Hyperinflationary World: Experimental Evidence," Econometrica, Econometric Society, Econometric Society, vol. 61(5), pages 1073-107, September.
    9. Marcet, Albert & Sargent, Thomas J, 1989. "Convergence of Least-Squares Learning in Environments with Hidden State Variables and Private Information," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(6), pages 1306-22, December.
    10. Anderson, M.J. & Sunder, S., 1989. "Professional Traders As Intuitive Bayesians," GSIA Working Papers, Carnegie Mellon University, Tepper School of Business 88-89-51, Carnegie Mellon University, Tepper School of Business.
    11. Marcet, Albert & Sargent, Thomas J., 1989. "Convergence of least squares learning mechanisms in self-referential linear stochastic models," Journal of Economic Theory, Elsevier, Elsevier, vol. 48(2), pages 337-368, August.
    12. Lucas, Robert E, Jr, 1986. "Adaptive Behavior and Economic Theory," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 59(4), pages S401-26, October.
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    Cited by:
    1. David K Levine & Aldo Rustichini, 2000. "Introduction: The Dynamic Games Special Issue," Levine's Working Paper Archive 2127, David K. Levine.
    2. David K. Levine & Aldo Rustichini, 2000. "Introduction," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(2), pages 213-215, April.

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