Economics, Econometrics and Finance
4 years ago

Barter economy model shows irrational expectations lead to inefficient outcomes.

Springer proceedings in complexity
Rational Versus Adaptive Expectations in an Agent-Based Model of a Barter Economy
Shyam Gouri Suresh

Paper Summary

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The article compares rational and adaptive expectations in a barter economy model. By simulating agents trading goods without prices, the study shows that using adaptive expectations can lead to inefficient outcomes like overproduction and underproduction. This approach differs significantly from using rational expectations.