Are sunspots learnable? An experimental investigation in a simple macroeconomic model

Jasmina Arifovic, George Evans and Olena Kostyshyna

Journal of Economic Dynamics and Control, 2020, vol. 110, issue C

Abstract: We conduct experiments with human subjects in a model with a positive production externality in which productivity is a nondecreasing function of the average level of employment of other firms. The model has three steady states and a sunspot equilibrium that fluctuates between the high and low steady states. Steady states are payoff ranked: low values give lower profits than higher values. We investigate whether subjects can learn a sunspot equilibrium. We observe coordination on the extrinsic announcements in our experimental economies. Cases of apparent convergence to the low and high steady states are also observed.

Keywords: Sunspots; Learning; Experiments with human subjects (search for similar items in EconPapers)
JEL-codes: D83 G20 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:110:y:2020:i:c:s0165188919301721

DOI: 10.1016/j.jedc.2019.103775

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