As if or What? – Expectations and Optimization in a Simple Macroeconomic Environment
AbstractIn this paper we report the results of a laboratory experiment, in which we observed the behavior of agents in a simple macroeconomic setting. The structure of the economy was only partially known to the players which is a realistic feature of our experiment. We investigate whether subjects manage to approach optimal behavior even if they lack important information. Furthermore, we analyze subjects’ perceptions of the model and whether their behavior is consistent with their perceptions. The full information model predicts changes of employment correctly, but not the level of employment. In the aggregate, subjects have correct perceptions, although individual perceptions are biased.We finally show that deviations from the full information solution are due to optimization failures than than misperceptions.
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Bibliographic InfoPaper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0055.
Length: 39 pages
Date of creation: Jul 2008
Date of revision:
Find related papers by JEL classification:
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-04 (All new papers)
- NEP-EXP-2008-11-04 (Experimental Economics)
- NEP-MAC-2008-11-04 (Macroeconomics)
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