A "sunspot" is a variable that has no direct impact on the economy's fundamental condition, such as preferences, endowments or technologies, but may nonetheless affect economic outcomes through the expectations channel as a coordination device. This paper investigates how people react to...

We conduct experiments with human subjects in a model with a positive production externality in which productivity is a non-decreasing function of the average level of employment of other firms. The model has three steady states: the low and high steady states are expectationally stable...

In this paper we explore the role of social influence for the coordination of effort choice in a game with strategic complementarities. Players are repeatedly randomly partitioned in groups to play a minimum effort game and choose their effort based on their beliefs about the minimal effort...

High-frequency trading (HFT) based on artificial intelligence (AI) has been quickly adopted as market practice and its impact on investors' trading behavior and financial market has raised an increasing concern about managing AI in finance. Due to the extreme diversity and complexity of FinTech...

We investigate how the level of strategic uncertainty affects the coordination power of publicly observed extrinsic signals in a controlled laboratory environment in the context of a bank-run game. We run three treatments featuring different levels of strategic uncertainty. Although theory...

Our study demonstrates how agents' expectations can interact dynamically with monetary and fiscal policy at the zero lower bound. We study expectation formation near the zero lower bound using a learning-to-forecast laboratory experiment under alternative policy regimes. In our experimental...

We study learning in the Kydland and Prescott environment. Our policy maker evaluates its potential strategies regarding the announced and the actual inflation rate using its mental model. This model is forward looking and adaptive at the same time. There are two types of agents: Believers who...

The creative destruction wrought by high-frequency algorithmic tradinghas raised increasing concerns about the eect of machine learning behaviorsand ultra high-frequency trading in finnancial markets. By employing a geneticalgorithm with a classifer system as an adaptive learning tool, we...

This paper develops a model that jointly accounts for the missing disinflation in the wake of the Great Recession and the subsequently observed inflation-less recovery. The key mechanism works through heterogeneous expectations that may durably lose their anchorage to the central bank (CB)'s...

Chapter 1 “Introduction” by Herbert Dawid and Jasmina Arifovic -- Chapter 2. “Cross-bidding in eBay-like Environments” by Francisco Alvarez and Marcello Sartarelli -- Chapter 3. “Risk–Reward Ratio Optimisation (Revisited)” by Manfred Gilli and Enrico Schumann -- Chapter 4....