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From self-fulfilling mistakes to behavioral learning equilibria

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  • Cars Hommes

    (University of Amsterdam, The Netherlands)

Abstract

This essay links some of my own work on expectations, learning and bounded rationality to the inspiring ideas of Jean-Michel Grandmont. In particular, my work on consistent expectations and behavioral learning equilibria may be seen as formalizations of JMG's ideas of self-fulfilling mistakes. Some of our learning-to-forecast laboratory experiments with human subjects have also been strongly influenced by JMG's ideas. Key features of self-fulfilling mistakes are multiple equilibria, excess volatility and persistence amplification.

Suggested Citation

  • Cars Hommes, 2017. "From self-fulfilling mistakes to behavioral learning equilibria," Tinbergen Institute Discussion Papers 17-018/II, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20170018
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    File URL: https://papers.tinbergen.nl/17018.pdf
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    References listed on IDEAS

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    18. Heemeijer, Peter & Hommes, Cars & Sonnemans, Joep & Tuinstra, Jan, 2009. "Price stability and volatility in markets with positive and negative expectations feedback: An experimental investigation," Journal of Economic Dynamics and Control, Elsevier, vol. 33(5), pages 1052-1072, May.
    19. William A. Branch & George W. Evans, 2010. "Asset Return Dynamics and Learning," The Review of Financial Studies, Society for Financial Studies, vol. 23(4), pages 1651-1680, April.
    20. Hommes, Cars H., 1998. "On the consistency of backward-looking expectations: The case of the cobweb," Journal of Economic Behavior & Organization, Elsevier, vol. 33(3-4), pages 333-362, January.
    21. James Bullard & George W. Evans & Seppo Honkapohja, 2008. "Monetary Policy, Judgment, and Near-Rational Exuberance," American Economic Review, American Economic Association, vol. 98(3), pages 1163-1177, June.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    expectations; learning; bounded rationality; chaos; almost self-fulfilling equilibria; laboratory experiments;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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