Persistent Heterogeneity in Working Households` Expectations Regarding Economic Conditions and Macroeconomic Dynamics

Wanderson Schmoeller Monteiro (), Jaylson Jair da Silveira () and Gilberto Lima

No 2026_04, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: The paper develops a novel evolutionary microdynamic of expectation switching on the part of working households and embeds it in a macrodynamic of capacity utilization and output growth driven by aggregate demand. The evolutionary microdynamic is specified by drawing on two important contributions to behavioral economics: the approach to satisficing choice developed by Herbert Simon and the approach to choice centered on the notion of reference dependence advanced by Daniel Kahneman and Amos Tversky. An essential role is performed in the evolutionary protocol of expectation switching by the focal notion of satisficing reference point. Notably, the microdynamics of the frequency distribution of expectations about future economic conditions across working households and the macrodynamics of capacity utilization and output growth arise as co-evolutionary phenomena. The evolutionary protocol grounded in satisficing reference dependence offers a plausible explanation for two closely related empirical regularities: the persistence of heterogeneity in working households` expectations about future economic conditions, formally derived herein as a unique and asymptotically stable evolutionary equilibrium, and the procyclical role played by these expectations as determinants of the actual level of economic activity.

Keywords: Heterogeneous expectations; evolutionary dynamics; satisficing behavior; reference dependence; output growth rate (search for similar items in EconPapers)
JEL-codes: D84 E12 O41 (search for similar items in EconPapers)
Date: 2026-02-13
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