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The Simonian bounded rationality hypothesis and the expectation formation mechanism

  • Kowalski, Tadeusz

Abstract. In the 1980s and at beginning of the 1990s the debate on expectation formation mechanism was dominated by the rational expectation hypothesis. Later on, more interest was directed towards alternative approaches to expectations analysis, mainly based on the bounded rationality paradigm introduced earlier by Herbert A. Simon. The bounded rationality approach is used here to describe the way expectations might be formed by different agents. Furthermore, three main hypotheses, namely adaptive, rational and bounded ones are being compared and used to indicate why time lags in economic policy prevail and are variable. JEL Codes: D78, D84, H30, E00.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33981.

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Date of creation: 2002
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Publication status: Published in Poznan Unversity of Economics Review Number 1, 2002.Volume(2002): pp. 5-24
Handle: RePEc:pra:mprapa:33981
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  1. Tversky, Amos & Slovic, Paul & Kahneman, Daniel, 1990. "The Causes of Preference Reversal," American Economic Review, American Economic Association, vol. 80(1), pages 204-17, March.
  2. Pindyck, Robert S, 1973. "Optimal Policies for Economic Stabilization," Econometrica, Econometric Society, vol. 41(3), pages 529-60, May.
  3. Simon, Herbert A, 1978. "Rationality as Process and as Product of Thought," American Economic Review, American Economic Association, vol. 68(2), pages 1-16, May.
  4. repec:cup:cbooks:9780521451895 is not listed on IDEAS
  5. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
  6. Heiner, Ronald A, 1983. "The Origin of Predictable Behavior," American Economic Review, American Economic Association, vol. 73(4), pages 560-95, September.
  7. repec:cpi:cpijrn:6.1.2010:i=5496 is not listed on IDEAS
  8. Simon, Herbert A, 1986. "Rationality in Psychology and Economics," The Journal of Business, University of Chicago Press, vol. 59(4), pages S209-24, October.
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