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A laboratory experiment on the heuristic switching model

Mikhail Anufriev (), Aleksei Chernulich and Jan Tuinstra ()

Journal of Economic Dynamics and Control, 2018, vol. 91, issue C, 21-42

Abstract: We present results from the first laboratory experiment on the seminal heuristic switching model introduced by Brock and Hommes (1997, 1998). Subjects choose between two alternatives, a sophisticated and stabilizing, but costly, heuristic, and a destabilizing, but cheap, heuristic, and are paid according to the performance of the chosen heuristic. Aggregate choices determine the evolution of a state variable and, consequently, the performance of both heuristics. Theoretically, an increase in the costs for the stabilizing heuristic generates instability and leads to endogenous fluctuations in both the state variable and the fraction of agents using that heuristic.

Keywords: Heuristic switching model; Heterogeneous agent models; Discrete choice; Experiments (search for similar items in EconPapers)
JEL-codes: C25 C91 D83 (search for similar items in EconPapers)
Date: 2018
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Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

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Handle: RePEc:eee:dyncon:v:91:y:2018:i:c:p:21-42