The formation of expectations : Competing theories and new evidence ∗ Gigi Foster and Paul Frijters
نویسنده
چکیده
Agents form expectations about the future in many markets, and these expectations drive investment and consumption behavior, inform entry and exit choices, and can even provide direct satisfaction or distress. How agents form expectations is therefore of central interest to economists. This paper reviews several competing theories and then provides empirical evidence about what elements make up an agent’s expectation about an outcome that is person-specific, susceptible to influence by the agent’s own actions, and fairly well predictable on the basis of historical precedent. We examine repeated cross-sections of hundreds of undergraduate students’ expectations at mid-semester of their own final course grades at two Australian universities. Data on actual and expected grades are exploited, as well as demographic and psychological information, socioeconomic information, and data on students’ academic background, effort levels, happiness, and historical progress at university prior to expectation formation. Results strongly indicate that a simple neoclassical model of expectations does not fit the data, and that a utility model involving either direct utility benefits from expectations, or a psychological need to hold high expectations, is a better candidate explanation for the empirical facts. ∗Foster is grateful to the Australian Research Council for support under Discovery grant DP0878138; Foster and Frijters acknowledge Discovery grant DP0987840. We thank the University of South Australia and the University of Technology Sydney. Sam Trezise provided research assistance. Special thanks are due to Peter Antony and Graeme Poole for extracting the data used in this paper.
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تاریخ انتشار 2010