Learning with Heterogeneous Expectations in an Evolutionary World

Eran Guse ()

No 99, Computing in Economics and Finance 2004 from Society for Computational Economics

Abstract: This paper studies a game theoretic model where agents choose between two updating rules to predict a future endogenous variable. Agents rationally choose between these predictors based on relative performance. Conditions for evolutionary stability and stability under learning are found for the Nash solutions and corresponding parameter equilibria. Stability conditions are contingent upon parameter values and the initial distribution of heterogeneity. However, when the cost of using the more advanced updating rule is sufficiently large, all agents will asymptotically use the more parsimonious, or Minimum State Variable (MSV), updating rule.

Keywords: Adaptive Learning; Evolutionary Dynamics; Heterogeneous Expectations; Multiple Equilibria; Rational Expectations. (search for similar items in EconPapers)
JEL-codes: C62 D84 E37 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-evo
Date: 2004-08-11
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Related works:
Working Paper: Learning with Heterogeneous Expectations in an Evolutionary World (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:sce:scecf4:99

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