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Rules of thumb in macroeconomic equilibrium: a quantitative analysis

Article Abstract:

A stochastic model in which agents are confronted with the explicit costs associated with sophisticated rules of behavior is examined. In this model, consumers select from savings rules that differ in complexity and effort cost, such that a consumer's gain from applying a sophisticated rule is greater than when the gain is obtained from simple rules. Results show that when sophisticated behavior is unrestricted, equilibrium occurs only when effort cost is very low. Results also show that rule-of-thumb economies lead to aggregate time series that are quite different from the standard model.

Decision-making, Decision making, Consumer behavior, Macroeconomics

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A model of experimentation with information externalities

Article Abstract:

Research was conducted to examine a simple model of experimentation and information externality where the consequences of the actions of each agent can be costlessly observed by other agents. The model offered a complete characterization of the noncooperative equilibrium in stationary strategies which was proven to be ineffective. An extension of the basic model was also considered wherein the probability of stabilization of any arm is greater when both players are using it.

Economics, Research and Development in the Social Sciences and Humanities, Economic research

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