The Econometric SocietyEdited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262
Econometrica: Sep, 1997, Volume 65, Issue 5
https://doi.org/0012-9682(199709)65:5<1059:ARRTR>2.0.CO;2-B
p. 1059-1095
Cars H. Hommes, William A. Brock
The concept of adaptively rational equilibrium (A.R.E.) is introduced. Agents adapt their beliefs over time by choosing from a finite set of different predictor or expectations functions. Each predictor is a function of past observations and has a performance or fitness measure which is publicly available. Agents make a rational choice concerning the predictors based upon their past performance. This results in a dynamics across predictor choice which is coupled to the equilibrium dynamics of the endogenous variables. As a simple, but typical, example we consider a cobweb type demand-supply model where agents can choose between rational and naive expectations. In an unstable market with (small) positive information costs for rational expectations, a high intensity of choice to switch predictors leads to highly irregular equilibrium prices converging to a strange attractor. The irregularity of the equilibrium time paths is explained by the existence of a so-called homoclinic orbit and its associated complicated dynamical phenomena. Thus local instability and global complicated dynamics may be a feature of a fully rational notion of equilibrium.
March 5, 2024
The terms of the Editors of the Econometric Society's three journals end June 30, 2025. We are pleased to announce the incoming Editors and to thank the outgoing Editors for their excellent and continuing service.
Econometrica: Since 2019, Guido Imbens has served as the 14th Editor of Econometrica. On July 1, 2025, Marina Halac will become the Editor.
Quantitative Economics: Stéphane Bonhomme has been the Editor of Quantitative Economics since 2021. His successor will be Bernard Salanié.
Theoretical Economics: The Editor of Theoretical Economics since 2021 has been Simon Board. Taking over for him in July 2025 will be Federico Echenique.
Guido, Stéphane, and Simon have been outstanding Editors. We are grateful to them for the work they have done and will continue to do, and we look forward to further congratulating them next year. We believe Marina, Bernard, and Federico will be outstanding successors and we thank them in advance for their service.
Finally, we are grateful to Larry Samuelson for chairing all three search committees, and we thank the search committee members for their hard and fruitful work:
Econometrica: Christian Dustmann, Lars Hansen, Alessandro Lizzeri, George Mailath, Ariel Pakes, Helene Rey, and Elie Tamer.
QE: Kate Ho, Michael Keane, Felix Kubler, Whitney Newey, and Frank Schorfheide.
TE: Jeff Ely, Johannes Horner, Gilat Levy, Meg Meyer, and Ran Spiegler.
