Local learning dynamics

Abstract

The paper undertakes a detailed characterization of the local dynamic properties of three simple deterministic models involving expectations. The expectations are formed under an adaptive learning process. Allowing for different degrees of learning quality, the analysis reveals the existence of a large variety of possible long term outcomes: in some scenarios, stability and instability are independent of the learning quality; in other circumstances, some minimal requirement on learning efficiency is necessary to attain stability; in some settings, it is even possible that high quality learning may prevent attaining the stable outcome that otherwise is accomplished.