On rational forward-looking behaviour in economic geography: An experimental analysis

37 Pages Posted: 26 Dec 2019 Last revised: 20 Jul 2020

See all articles by Iván Barreda‐Tarrazona

Iván Barreda‐Tarrazona

Jaume I University

Tapas Kundu

Oslo Business School, Oslo Metropolitan University; UiT the Arctic University of Norway

Stein Ostbye

University of Tromso - Norges fiskerihøgskole

Date Written: December 5, 2019

Abstract

This paper adapts the canonical New Economic Geography model for experimental testing of the model's behavioural assumptions by developing a finite-player, finite-horizon dynamic game of migration. Our analysis gives distinctive predictions when migration is consistent with myopic behaviour (MB) and when it is consistent with sequentially rational or perfect forward-looking behaviour (FB). These alternatives are tested in an economic laboratory experiment with increasing number of agents in different treatments. Results show that perfect FB loses ground against MB as the number of agents and periods increases, and this number may be surprisingly small.

Keywords: New Economic Geography, Migration, Experiments

JEL Classification: R1, C91, C73

Suggested Citation

Barreda‐Tarrazona, Iván and Kundu, Tapas and Ostbye, Stein, On rational forward-looking behaviour in economic geography: An experimental analysis (December 5, 2019). Available at SSRN: https://ssrn.com/abstract=3492318 or http://dx.doi.org/10.2139/ssrn.3492318

Iván Barreda‐Tarrazona

Jaume I University

Castellon
E-12071 Castello de la Plana, Castellón de la Plana 12071
Spain

Tapas Kundu (Contact Author)

Oslo Business School, Oslo Metropolitan University ( email )

Pilestredet 35
Oslo, 0167
Norway

HOME PAGE: http://www.tapaskundu.net

UiT the Arctic University of Norway ( email )

Breivika
Tromsø, NO-9037
Norway

HOME PAGE: http://www.tapaskundu.net

Stein Ostbye

University of Tromso - Norges fiskerihøgskole

Tromso, N-9037
Norway

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
14
Abstract Views
198
PlumX Metrics