We introduce the concept of Adaptively Rational Equilibrium (A.R.E.) where agents base decisions upon predictions of future values of endogenous variables whose actual values are determined by equilibration. Predictors are chosen from a finite set. Each predictor is a function of past...

We introduce a simple equilibrium model of a market for loans, where households lend to firms based on heterogeneous expectations about their loan default probability. Agents select among heterogeneous expectation rules, based upon their relative performance. A small fraction of pessimistic...

We introduce a simple equilibrium model of a market for loans, where households lend to firms based on heterogeneous expectations about their loan default probability. Agents select among heterogeneous expectation rules, based upon their relative performance. A small fraction of pessimistic...

Adaptively rational equilibrium is introduced, where agents adapt their beliefs by choosing from a finite set of predictor functions. Agents make a rational predictor choice, based upon a publically available performance measure such as realized past profits. This results in an adaptive belief...