Chapter 9. Heterogeneous Agent Modeling: Experimental Evidence

We report on experimental evidence rationalizing the use of heterogeneous agent models. We provide compelling evidence that subjects in laboratory experiments often behave in ways that depart from the rational choice ideal. Further, these subjects' heuristic approaches often differ from one another in distinct, classifiable ways. It follows that models of heterogeneous, boundedly rational agents can often deliver predictions that are a better fit to the experimental data at both the micro- and the macro-levels of analysis than can rational-choice, single-actor models. Our focus in this chapter is on experimental studies developed to address questions in macroeconomics and finance.