Microfoundations for switching behavior in heterogeneous agent models: An experiment

Mikhail Anufriev, Te Bao and Jan Tuinstra

Journal of Economic Behavior & Organization, 2016, vol. 129, issue C, 74-99

Abstract: We run a laboratory experiment to study how human subjects switch between several profitable alternatives, framed as mutual funds, in order to provide a microfoundation for so-called heterogeneous agent models. The participants in our experiment have to choose repeatedly between two, three or four experimental funds. The time series of fund returns are exogenously generated prior to the experiment and participants are paid for each period according to the return of the fund they choose. For most cases participants’ decisions can be successfully described by a discrete choice switching model, often applied in heterogeneous agent models, provided that a predisposition toward one of the funds is included. The estimated intensity of choice parameter of the discrete choice model depends on the structure of the fund returns. In particular, it increases with correlation between past and future returns. This suggests human subjects do not myopically chase past returns, but are more likely to do so when past returns are more predictive of future returns, a feature that is absent in the standard heterogeneous agent models.

Keywords: Heterogeneous agent models; Discrete choice; Switching; Experiments (search for similar items in EconPapers)
JEL-codes: C25 C91 D83 (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (24)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S016726811630110X
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Microfoundations for Switching Behavior in Heterogeneous Agent Models: An Experiment (2015)
Working Paper: Microfoundations for Switching Behavior in Heterogeneous Agent Models: An Experiment (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:129:y:2016:i:c:p:74-99

DOI: 10.1016/j.jebo.2016.06.002

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().