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Expectations formation under adaptive learning and evolutionary dynamics

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  • Michele Berardi

Abstract

Bounded rationality requires assumptions about ways in which rationality is constrained, and different assumptions are likely to lead to different economic predictions. In a simple forward-looking model we compare adaptive learning and evolutionary dynamics as means to model the process of beliefs' adaptation in response to observed outcomes. We show that the two methods deliver different conclusions about equilibrium and transition dynamics, and we try to shed some light on the reasons for such discrepancies.

Suggested Citation

  • Michele Berardi, 2015. "Expectations formation under adaptive learning and evolutionary dynamics," Centre for Growth and Business Cycle Research Discussion Paper Series 206, Economics, The University of Manchester.
    • Handle: RePEc:man:cgbcrp:206
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    File URL: http://hummedia.manchester.ac.uk/schools/soss/cgbcr/discussionpapers/dpcgbcr206.pdf
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    References listed on IDEAS

    as
    1. Berardi, Michele, 2015. "On the fragility of sunspot equilibria under learning and evolutionary dynamics," Journal of Economic Behavior & Organization, Elsevier, vol. 112(C), pages 251-265.
    2. Mikhail Anufriev & Cars Hommes, 2012. "Evolutionary Selection of Individual Expectations and Aggregate Outcomes in Asset Pricing Experiments," American Economic Journal: Microeconomics, American Economic Association, vol. 4(4), pages 35-64, November.
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