Learning to believe in Simple Equilibria in a Complex OLG Economy - evidence from the lab
Jasmina Arifovic,
C.H. Hommes () and
Isabelle Salle
Additional contact information
C.H. Hommes: University of Amsterdam
No 16-06, CeNDEF Working Papers from Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance
Abstract:
We set up a laboratory experiment within the overlapping-generations model of Grandmont (1985). Under perfect foresight this model displays infinitely many equilibria: a steady state, periodic as well as chaotic equilibria. Moreover, there exists some learning theory predicting convergence to each of these equilibria. We use experimental evidence as an equilibrium selection device in this complex OLG economy, and investigate on which outcomes subjects most likely coordinate. We use two alternative experimental designs: learning-to-forecast, in which subjects predict the future price of the good, and learning-to-optimize, in which subjects make savings decision. We find that coordination on a steady state or 2-cycle are the only outcomes in this complex environment. In the learning-to-forecast design, coordination on a 2-cycle occurs frequently, even in the chaotic parameter range. Simulations of a behavioral heuristic switching model result in initial coordination on a simple AR(1) rule though sample autocorrelation learning, with subsequent coordination on a simple second-order adaptive rule once the up-and-down pattern of prices has been learned.
Date: 2016
New Economics Papers: this item is included in nep-dge and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
http://cendef.uva.nl/binaries/content/assets/subsi ... le.pdf?1471980971753 (application/pdf)
Related works:
Journal Article: Learning to believe in simple equilibria in a complex OLG economy - evidence from the lab (2019) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:ams:ndfwpp:16-06
Access Statistics for this paper
More papers in CeNDEF Working Papers from Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance Dept. of Economics and Econometrics, Universiteit van Amsterdam, Roetersstraat 11, NL - 1018 WB Amsterdam, The Netherlands. Contact information at EDIRC.
Bibliographic data for series maintained by Cees C.G. Diks ().