Boundedly Rational Agents Fuel Economic Booms and Busts, Challenging Conventional Wisdom
Economic fluctuations can be explained by interactions of agents who are not fully rational. Agents have different ways of making decisions, leading to a complex system. The study looks at housing markets, forecasting methods, and monetary policies to understand how these interactions affect the economy. The research shows that bubbles can develop in the housing market without everyone being rational. Different forecasting methods can influence individual behavior, and various monetary policies can stabilize the economy with agents having different strategies.