Abstract: The major theme of this book is the theory of rational expectations and its role in modern macroeconomics. In this chapter, we depart somewhat from that theme and introduce rational expectations in a microeconomic context, where the impact of expectations is more readily apparent. In this way, we hope to highlight the role of expectations and give some practice in utilising expectations-based models. We briefly consider the role of expectations in economics, and outline the historical antecedents of rational expectations. Then we introduce the notion of rational expectations into the familiar context of a simple cobweb model and show how this modification radically alters the results obtained.
Publication Year: 1984
Publication Date: 1984-01-01
Language: en
Type: book-chapter
Indexed In: ['crossref']
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Cited By Count: 5
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