Markets wanted: Expectation overshooting in transition

Frank Neher

No 2011/1, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: We analyse and compare individual beliefs about the effects of competition and their evolution over time in transition economies and experienced market economies. At the onset of transition, competition beliefs in transition countries are far more positive than in market economies. Over time, this difference has vanishes. Convergence can be attributed to changing believes in transition countries. We argue that overly optimistic competition beliefs in transition countries contributed to the possibility of implementing far reaching pro-market reforms and show that competition beliefs underlay support for economic reform. The empirical analysis is supplemented with a simple learning model rationalizing the findings on competition belief overshooting.

Keywords: convergence; beliefs; public support; reform; bias; signalling (search for similar items in EconPapers)
JEL-codes: D72 D83 P5 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fubsbe:20111

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