Economic modeling of financial markets attempts to model highly complex systems in which expectations can be among the dominant driving forces. It is necessary, then, to focus on how agents form expectations. We believe that they look for patterns, hypothesize, try, make mistakes, learn and...

Inflation expectations are a key variable in conducting monetary policy. However, these expectations are generally unobservable and only certain proxy variables exist, such as surveys on inflation expectations. This paper offers guidance on the appropriate quantification of household inflation...

The rational expectations hypothesis is one of the cornerstones of current economic theorising. This review discusses a number of experiments that focus on expectation formation by human subjects and analyses the implications for the rational expectations hypothesis. The experiments show that...

This paper proposes axiomatic foundations of expectation formation rules, by which deviating players anticipate the reaction of external players in a partition function game. The projection rule is the only rule satisfying subset consistency and responsiveness to the original partition of...

This research analyzes how consumers' bidding costs and expectations about the threshold price impact a Name-Your-Own-Price (NYOP) retailer. We find that an NYOP retailer's profit may increase if consumers learn the product's true price threshold distribution. Inaccurate expectations can be...

Abstract. Using Consensus Economics survey data on JPY/USD and GBP/USD exchange rate expectations for the 3- and 12-month horizons over the period November 1989 – December 2012 we first show that expectations fail to unbiasedness tests and do not exhibit a learning process towards rationality....

Using Consensus Economics survey data on JPY/USD and GBP/USD exchange rate expectations for the 3- and 12-month horizons over the period November 1989 – December 2012 we first show that expectations fail to unbiasedness tests and do not exhibit a learning process towards rationality. Our...