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Inflation and Expectations in Experimental Markets

Daniels, Brian P. and Plott, Charles R. (1988) Inflation and Expectations in Experimental Markets. In: Bounded Rational Behavior in Experimental Games and Markets. Lecture notes in economics and mathematical systems. No.314. Springer-Verlag , Berlin, pp. 198-218. ISBN 978-3-642-48356-1. https://resolver.caltech.edu/CaltechAUTHORS:20140311-133427669

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Abstract

A total of nine experimental markets were studied. Seven of these involved eleven or twelve periods of inflation at a constant percentage and then two or three periods of no inflation. Two Experiments involved no inflation for twelve periods and then inflation at a constant rate for three periods. In all but three markets, participants were asked to guess the mean price of the upcoming market period before they had any information about the parameters for that period. The subject with the best guess was given a financial reward in addition to any profit earned in the market. Convergence properties are compared. Rational expectations models are tested and the structure of forecasts are studied. In general, the rational expectations models capture much of what is observed but paradoxes exist in the data and in the application of the models.


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Additional Information:© 1988 Springer-Verlag. The financial support of the National Science Foundation and the Caltech Program of Enterprise and Public Policy is gratefully acknowledged. The authors also wish to thank David Grether, Kemal Guler, Jeffrey Dubin, Thomas Saving, and Edward Zanelli.
Group:Social Science Working Papers
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Series Name:Lecture notes in economics and mathematical systems
Issue or Number:314
Record Number:CaltechAUTHORS:20140311-133427669
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20140311-133427669
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:44251
Collection:CaltechAUTHORS
Deposited By: Susan Vite
Deposited On:20 Mar 2014 21:00
Last Modified:03 Oct 2019 06:15

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