Agents forming adaptive expectations generally make systematic mistakes. This characterization has fostered the rejection of adaptive expectations in macroeconomics. Experimental evidence, however, shows that in complex environments human subjects frequently rely on adaptive heuristics –...

Agents forming adaptive expectations generally make systematic mistakes. This characterization has fostered the rejection of adaptive expectations in macroeconomics. Experimental evidence, however, shows that in complex environments human subjects frequently rely on adaptive heuristics –...

This book deals with the economy as a complex interactive system. The emphasis is on the direct interaction between agents rather than on the indirect and autonomous interaction through the market mechanism. Contributions from economists and physicists emphasise the consequences for aggregate...

There are situations in which the old-fashioned adaptive expectation process seems to provide a good description of agents' behavior (Chow, 2011). Unfortunately, this expectation scheme may not satisfy the necessary rationality condition (unconditional mean-zero error). This paper shows how to...