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Expectations in Experiments

Author

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  • Florian Wagener

    (CeNDEF, University of Amsterdam)

Abstract

This discussion paper resulted in a publication in 'Annual Review of Economics' , 2014, 6, 421-443. The rational expectations hypothesis is one of the cornerstones of current economic theorising. This review discusses a number of experiments that focus on expectation formation by human subjects and analyses the implications for the rational expectations hypothesis. The experiments show that most agents are weakly rational and that their expectations coordinate quickly; but the strong rational expectations hypothesis poorly describes the expectational dynamics and is outperformed by other hypotheses.

Suggested Citation

  • Florian Wagener, 2013. "Expectations in Experiments," Tinbergen Institute Discussion Papers 13-125/II, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20130125
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    File URL: https://papers.tinbergen.nl/13125.pdf
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    Cited by:

    1. Cars Hommes, 2013. "Reflexivity, expectations feedback and almost self-fulfilling equilibria: economic theory, empirical evidence and laboratory experiments," Journal of Economic Methodology, Taylor & Francis Journals, vol. 20(4), pages 406-419, December.
    2. Alan Kirman, 2014. "Is it rational to have rational expectations?," Mind & Society: Cognitive Studies in Economics and Social Sciences, Springer;Fondazione Rosselli, vol. 13(1), pages 29-48, June.
    3. Hommes, Cars H., 2014. "Behaviorally Rational Expectations and Almost Self-Fulfilling Equilibria," Review of Behavioral Economics, now publishers, vol. 1(1-2), pages 75-97, January.
    4. Tiziana Assenza & Te Bao & Cars Hommes & Domenico Massaro, 2014. "Experiments on Expectations in Macroeconomics and Finance," Research in Experimental Economics, in: Experiments in Macroeconomics, volume 17, pages 11-70, Emerald Group Publishing Limited.
    5. Mikhail Anufriev & Cars Hommes & Tomasz Makarewicz, 2019. "Simple Forecasting Heuristics that Make us Smart: Evidence from Different Market Experiments," Journal of the European Economic Association, European Economic Association, vol. 17(5), pages 1538-1584.
    6. Le Van, Cuong & Navrouzoglou, Paulina & Vailakis, Yiannis, 2019. "On endogenous formation of price expectations," Games and Economic Behavior, Elsevier, vol. 115(C), pages 436-458.

    More about this item

    Keywords

    Rational expectations; expectation formation; laboratory experiments; human subjects;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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