Are sunspots learnable? An experimental investigation in a simple macroeconomic model

Jasmina Arifovic; George Evans; Olena Kostyshyna

doi:10.1016/j.jedc.2019.103775

Are sunspots learnable? An experimental investigation in a simple macroeconomic model

Jasmina Arifovic, George Evans, Olena Kostyshyna

Research output: Contribution to journal › Article › peer-review

Abstract

We conduct experiments with human subjects in a model with a positive production externality in which productivity is a nondecreasing function of the average level of employment of other firms. The model has three steady states and a sunspot equilibrium that fluctuates between the high and low steady states. Steady states are payoff ranked: low values give lower profits than higher values. We investigate whether subjects can learn a sunspot equilibrium. We observe coordination on the extrinsic announcements in our experimental economies. Cases of apparent convergence to the low and high steady states are also observed.

Original language	English
Journal	Journal of Economic Dynamics and Control
Volume	In press
Early online date	10 Oct 2019
DOIs	https://doi.org/10.1016/j.jedc.2019.103775
Publication status	E-pub ahead of print - 10 Oct 2019

Keywords

Sunspots
Learning
Experiments with human subjects

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10.1016/j.jedc.2019.103775

Arifovic_2019_JEDC_Sunspots_AAM
Copyright © 2019 Published by Elsevier B.V. This work has been made available online in accordance with publisher policies or with permission. Permission for further reuse of this content should be sought from the publisher or the rights holder. This is the author created accepted manuscript following peer review and may differ slightly from the final published version. The final published version of this work is available at https://doi.org/10.1016/j.jedc.2019.103775
Accepted author manuscript, 991 KBLicence: CC BY-NC-ND

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AB - We conduct experiments with human subjects in a model with a positive production externality in which productivity is a nondecreasing function of the average level of employment of other firms. The model has three steady states and a sunspot equilibrium that fluctuates between the high and low steady states. Steady states are payoff ranked: low values give lower profits than higher values. We investigate whether subjects can learn a sunspot equilibrium. We observe coordination on the extrinsic announcements in our experimental economies. Cases of apparent convergence to the low and high steady states are also observed.

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KW - Experiments with human subjects

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Are sunspots learnable? An experimental investigation in a simple macroeconomic model

Abstract

Keywords

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