Private Experience in Adaptive Learning Models
AbstractExperiments 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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