This paper derives a general New Keynesian framework with heterogeneous expectations by explicitly solving the micro-foundations underpinning the model. The resulting reduced form is analytically tractable and encompasses the representative rational agent benchmark as a special case. We specify...

We present results from 50-rounds experimental markets in which firms decide repeatedly both on price and quantity of a perishable good. The experiment is designed to study the price–quantity setting behavior of subjects acting as firms in monopolistic competition. In the implemented...