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Only Paul Could Go To Changchun

Are Sunspots Learnable? An Experimental Investigation in a Simple Macroeconomic Model

2/13/2020

 
Here.

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.

From:

Jasmina Arifovic
George Evans
Olena Kostyshyna
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