Recent studies suggest that the type of strategic environment or expectation feedback may have a large impact on whether the market learns the rational fundamental price. We present an experiment where the fundamental price experiences large unexpected shocks. Markets with negative expectation...

Rational Expectations (RE) models have two crucial dimensions: 1) agents correctly forecast future prices given all available information, and 2) given expectations, agents solve optimization problems and these solutions in turn determine actual price realizations. Experimental testing of such...

This paper analyzes the internal divisional structure within an organization in the framework of incomplete contract theory. We use the framework of Aghion and Tirole (1997) and dene the managerial control structure as \sequence of search". A key feature of this paper which di erentiate it from...

We run a laboratory experiment that contributes to the finance literature on "return chasing behavior" studying how investors switch between mutual funds driven by past performance of the funds. The subjects in this experiment make discrete choices between several (2, 3 or 4) experimental funds...

We propose behavioral learning equilibria as a plausible explanation of coordination of individual expectations and aggregate phenomena such as excess volatility in stock prices and high persistence in inflation. Boundedly rational agents use a simple univariate linear forecasting rule and...

We construct an evolutionary version of Theocharis (1960)'s seminal work on the stability of equilibrium in multi-player quantity-setting oligopolies. Two sets of behavioral heuristics are investigated under fixed and endogenously evolving fractions: (myopic) Cournot firms vs. Nash firms and...

We discuss recent work on bounded rationality and learning in relation to Soros' principles of reflexivity and stress the empirical relevance of non-rational, almost self-fulfilling equilibria in positive feedback systems. We fit a behavioral asset pricing model with heterogeneous expectations...

We propose a behavioural model of technological change with evolutionary switching between boundedly rational costly innovators and free imitators, and study the endogenous interplay of innovation decisions, market price dynamics and technological progress. Innovation and imitation are strategic...

Rational expectations assumes perfect, model consistency between beliefs and market realizations. Here we discuss behaviorally rational expectations, characterized by an observable, parsimonious and intuitive form of consistency between beliefs and realizations. We discuss three case-studies....

We introduce a simple equilibrium model of a market for loans. Households lend to firms and form expectations about their loan default probability. Under heterogeneous expectations, with switching between forecasting strategies driven by reinforcement learning, even a small fraction of...