This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. Journals
  3. American Economic Journal: Macroeconomics
  4. January 2016
  5. Time and State Dependence in an Ss Decision Experiment

American Economic Journal:
Macroeconomics

ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)

Time and State Dependence in an Ss Decision Experiment

  • Jacopo Magnani
  • Aspen Gorry
  • Ryan Oprea
American Economic Journal: Macroeconomics
vol. 8, no. 1, January 2016
(pp. 285–310)
Download Full Text PDF

Abstract

Flow earnings in a laboratory experiment decline the further a Brownian state variable, z, evolves from its optimal level, z*. Optimal state dependent models predict subjects will pay a fixed cost to return z to z* only when z strays outside a critical inaction region around the optimum. On average, subjects adjust at states remarkably close to optimal threshold levels but, as in the field, do not establish true "state dependent" inaction regions, suggesting significant "time dependent" components in adjustment rules. Structural estimates of subjective observation cost qualitatively account for variation in time dependence observed across treatments. (JEL C91, D21, D80)

Citation

Magnani, Jacopo, Aspen Gorry, and Ryan Oprea. 2016. "Time and State Dependence in an Ss Decision Experiment." American Economic Journal: Macroeconomics, 8 (1): 285–310. DOI: 10.1257/mac.20130267

Additional Materials

JEL Classification

  • C91 Design of Experiments: Laboratory, Individual
  • D21 Firm Behavior: Theory
  • D80 Information, Knowledge, and Uncertainty: General
There are no comments for this article.
Login to Comment