The purpose of this paper is to investigate expectation formation in a controlled experimental environment. Subjects are asked to predict next periods price in an unknown, unstable nonlinear cobweb economy with expectational feedback. Subjects have no information about underlying market...

We construct an evolutionary version of Theocharis (1960)'s seminal work on the stability of equilibrium in multi-player quantity-setting oligopolies. Two sets of behavioral heuristics are investigated under fixed and endogenously evolving fractions: (myopic) Cournot firms vs. Nash firms and...

An evolutionary game theoretic model of Cournot competition is investigated. Individuals choose from a finite set of different behavioural rules. Each rule specifies the quantity to be produced in the current period as a function of past quantities. Using more sophisticated rules may require...

Minority games are a stylized description of strategic situations with both coordination and competition. These games are widely studied using either simulations or laboratory experiments. Simulations can show the dynamics of aggregate behavior, but the results of such simulations depend on the...

Different theories of expectation formation and learning usually yield different outcomes for realized market prices in dynamic models. The purpose of this paper is to investigate expectation formation and learning in a controlled experimental environment. Subjects are asked to predict the next...

We propose behavioral learning equilibria as a plausible explanation of coordination of individual expectations and aggregate phenomena such as excess volatility in stock prices and high persistence in inflation. Boundedly rational agents use a simple univariate linear forecasting rule and...

We discuss recent work on bounded rationality and learning in relation to Soros' principles of reflexivity and stress the empirical relevance of non-rational, almost self-fulfilling equilibria in positive feedback systems. We fit a behavioral asset pricing model with heterogeneous expectations...

We propose a behavioural model of technological change with evolutionary switching between boundedly rational costly innovators and free imitators, and study the endogenous interplay of innovation decisions, market price dynamics and technological progress. Innovation and imitation are strategic...

Rational expectations assumes perfect, model consistency between beliefs and market realizations. Here we discuss behaviorally rational expectations, characterized by an observable, parsimonious and intuitive form of consistency between beliefs and realizations. We discuss three case-studies....

We introduce a simple equilibrium model of a market for loans. Households lend to firms and form expectations about their loan default probability. Under heterogeneous expectations, with switching between forecasting strategies driven by reinforcement learning, even a small fraction of...