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

Jasmina Arifovic, George Evans, Olena Kostyshyna

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    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 languageEnglish
    JournalJournal of Economic Dynamics and Control
    VolumeIn press
    Early online date10 Oct 2019
    DOIs
    Publication statusE-pub ahead of print - 10 Oct 2019

    Keywords

    • Sunspots
    • Learning
    • Experiments with human subjects

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