Learning the optimal buffer-stock consumption rule of Carroll

Murat Yildizoglu, Marc-Alexandre Senegas, Isabelle Salle and Martin Zumpe

Cahiers du GREThA (2007-2019) from Groupe de Recherche en Economie Théorique et Appliquée (GREThA)

Abstract: This article questions the rather pessimistic conclusions of Allen et Carroll (2001) about the ability of consumer to learn the optimal buffer-stock based consumption rule. To this aim, we develop an agent based model where alternative learning schemes can be compared in terms of the consumption behaviour that they yield. We show that neither purely adaptive learning, nor social learning based on imitation can ensure satisfactory consumption behaviours. By contrast, if the agents can form adaptive expectations, based on an evolving individual mental model, their behaviour becomes much more interesting in terms of its regularity, and its ability to improve performance (which is as a clear manifestation of learning). Our results indicate that assumptions on bounded rationality, and on adaptive expectations are perfectly compatible with sound and realistic economic behaviour, which, in some cases, can even converge to the optimal solution. This framework may therefore be used to develop macroeconomic models with adaptive dynamics.

Keywords: Consumption decisions; Learning; Expectations; Adaptive behaviour, Computational economics (search for similar items in EconPapers)
JEL-codes: D83 D84 D91 E21 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cbe, nep-cmp and nep-mac
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Related works:
Journal Article: LEARNING THE OPTIMAL BUFFER-STOCK CONSUMPTION RULE OF CARROLL (2014)
Working Paper: Learning the optimal buffer-stock consumption rule of Carroll (2014)
Working Paper: Learning the optimal buffer-stock consumption rule of Carroll (2011)
Working Paper: Learning the optimal buffer-stock consumption rule of Caroll (2011)
Working Paper: Learning the optimal buffer-stock consumption rule of Carroll (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:grt:wpegrt:2011-11

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