This book offers a broad perspective on the ecomics of expectations. Experimental studies are used to analyse how human bounded rationality affects ecomic performance. The challenges posed for policy making are also addressed. Tobias Rotheli begins by presenting the basic tools and theoretical models necessary to our understanding of rational and boundedly rational expectations and their role in ecomic life. Key topics discussed include expectations in general equilibrium theory, probabilities and expected utility, heterogeneity of ecomic agents, behavioural alternatives to forecasting and the effects of expectations heuristics, particularly in financial markets. The author then goes on to explore the fascinating insights behavioural ecomics - the empirical analysis of ecomic decision making - has to offer. Here experimental studies illustrate the effects of costly information, the role of pattern recognition as basis of expectations, anticipation and coordination failures, and the role of expectations in determining the general price level. The book also addresses the implications of the experimental findings for applied ecomics. Aiming to achieve the accessibility of a textbook, this research mograph will appeal to ecomic researchers interested in ecomic behaviour and theory, as well as students taking upper-level undergraduate and graduate courses. It will also be of interest to ecomists working in business and government.
Tobias F. Rotheli, Professor of Economics, University of Erfurt, Germany