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Expectations ostensibly lead to the formation of hierarchies, and hierarchies are thought to improve coordination. A simulation model is introduced to determine whether expectations directly improve coordination.

Agent-based simulations of small group behavior are used to determine what rules for expectation formation best coordinate groups. Within groups of agents that have differing but unknown task abilities, pairs take turns playing a coordination game with one another. The group receives a positive payoff when one agent chooses to take a high-importance role (leader) and the other chooses a low-importance role (follower), where the payoff is proportional to the ability of the “leader.” When both individuals vie to be leader, a costly conflict gives the group information about which agent has a higher task-ability.

The rules governing individuals’ formation of expectations about one another often lead to coordination that is suboptimal: They do not capitalize on the differential abilities of group members. The rules do, however, minimize costly conflicts between individuals. Therefore, standard rules of expectation formation are only optimal when conflicts are costly or provide poor information.

Rules that govern the formation of expectations may have served an evolutionary purpose in guiding individuals towards coordination while minimizing conflict, but these psychologically hardwired rules lead to suboptimal hierarchies.

This paper looks at how well empirically observed expectation-generating rules lead to group coordination by adding a game theoretic conception of interaction to the e-state structuralism model of hierarchy formation.

Much of the literature in organizational change has taken a single approach to explain employee expectation formation regarding the outcomes of a change event. A conceptual model is developed to integrate two existing streams of research (the information effects approach and the social effects approach) and to develop a comprehensive picture of outcome expectation formation. We propose that information and social effects function simultaneously to shape an employee's outcome expectations. The strength and content consistency of information and social effects jointly determine what people expect regarding change outcomes and how confident they feel about those expectations. Implications are discussed in terms of setting the boundaries for information and social effects as well as future research directions.

Empirical work in macroeconomics almost universally relies on the hypothesis of rational expectations (RE).

This chapter departs from the literature by considering a variety of alternative expectations formation models. We study the econometric properties of a popular New Keynesian monetary DSGE model under different expectational assumptions: the benchmark case of RE, RE extended to allow for “news” about future shocks, near-RE and learning, and observed subjective expectations from surveys.

The results show that the econometric evaluation of the model is extremely sensitive to how expectations are modeled. The posterior distributions for the structural parameters significantly shift when the assumption of RE is modified. Estimates of the structural disturbances under different expectation processes are often dissimilar.

The modeling of expectations has important effects on the ability of the model to fit macroeconomic time series. The model achieves its worse fit under RE. The introduction of news improves fit. The best-fitting specifications, however, are those that assume learning. Expectations also have large effects on forecasting. Survey expectations, news, and learning all work to improve the model's one-step-ahead forecasting accuracy. RE, however, dominate over longer horizons, such as one-year ahead or beyond.

This paper aims to reply to Dequech's comment in the International Journal of Social Economics on the analysis of the formation of conventional expectations under strong uncertainty, which was proposed in the present author's 2004 article in the International Journal of Social Economics.

The scope of this reply is to evaluate through a theoretical examination the validity of Dequech's claim contained in his comment that his initial analytical scheme of the state of expectations presented in his 1999 article was general enough to accommodate the psychological considerations, which were raised in the present author's 2004 article and which were associated with Keynes's analysis as well as with developments in the field of social psychology.

The paper demonstrates that both Dequech's initial article of the state of expectations and his subsequent comment on the present author's contribution on the conventional formation of expectations under strong uncertainty in the International Journal of Social Economics overlooked the psychological nature of the process of inferences, a fundamental factor in Keynes's discussion of the formation of conventional expectations. However, when social psychology considerations are introduced in the analysis (as it was the case with the present author's approach) and when the remarkable theoretical and empirical progress in the field of social psychology is taken into account, Dequech's claim of the generality of his framework is not justifiable because both the specific nature and the substantive impact of the social psychology issues associated with the role of inferences are overlooked across his analysis. It is proposed that a theoretical scheme that uses the wealth of evidence of contemporary social psychology is more promising for a rigorous development of a theory of expectations under strong uncertainty.

The paper sheds further light on expectancy theory.

This study investigates which expectation formation mechanism governs Eurozone firms regarding their expectations on external finance availability.

In this study, we link consecutive surveys from the Survey on the Access to Finance of Enterprises to bring new evidence on how non-financial corporations shape their expectations on external finance availability.

In line with the past literature, we demonstrate that the data reject the Rational Expectations hypothesis, and we find evidence in favor of the Adaptive Expectation mechanism.

This is the first study studying firms' expectations of external finance availability, implementing survey data of firms' expectations from the SAFE database on a country level. The formation of firm expectations is vital in directing policymakers in designing appropriate monetary policies, as both the employment and inflation targets of central banks around the world are highly dependent on the firm-level decision process.

This article develops an analysis of the conventional formation of expectations by means of introducing an overlooked factor in the analysis: the role of inference. Individual inferences and changes in evidential weight of beliefs and in the state of confidence are integrated with an analysis of the conventional character of expectations in a manner that is consistent with evidence provided by research in social psychology. This approach provides the link between the “agency” approach and the “structure” approach in Keynesian analysis that has been stressed as an important development. It also improves our understanding of the mechanisms underlying economic behavior under uncertainty such as liquidity‐preference in different social and cultural settings.

Networks and relationships are not stable. On the contrary, they change and are transformed by the actors who take part in them. Change and transformation result from the actions and reactions of these actors. However, a key issue is what makes the actors choose some actions and reactions while refraining from others. The paper aims to discuss these issues.

The authors argue that the actors’ expectations to the future of the network are formative for the actions and reactions and, furthermore, that the future expectations are formed by interaction among the actors that take part in the networks.

The authors depart from the existing foresight literature, but realign its ideas to fit with the core tenets of the IMP approach. Thereby, the purpose is twofold: to explore and conceptualize network foresight phenomena as well as to contribute to the practice of collective foresighting in business networks.

The authors suggest research into formations of expectations in networks with a specific view to the interactive and structural effects of networks. Furthermore, the authors suggest a framework for categorizing network episodes and linking these to the formation of recognized issues and solutions.

The authors provide a framework for analyzing the focus of business networks in terms of solutions and issues, and analytically breaking down the interaction among these.

The authors introduce the concept of business network foresight, both as a distinct concept that enables us to understand change and transformation in networks, but also as a procedure for supporting actors’ strategizing efforts in business networks.

This paper surveys the treatment of expectations in estimated Dynamic Stochastic General Equilibrium (DSGE) macroeconomic models.

A recent notable development in the empirical macroeconomics literature has been the rapid growth of papers that build structural models, which include a number of frictions and shocks, and which are confronted with the data using sophisticated full-information econometric approaches, often using Bayesian methods.

A widespread assumption in these estimated models, as in most of the macroeconomic literature in general, is that economic agents' expectations are formed according to the Rational Expectations Hypothesis (REH). Various alternative ways to model the formation of expectations have, however, emerged: some are simple refinements that maintain the REH, but change the information structure along different dimensions, while others imply more significant departures from rational expectations.

I review here the modeling of the expectation formation process and discuss related econometric issues in current structural macroeconomic models. The discussion includes benchmark models assuming rational expectations, extensions based on allowing for sunspots, news, sticky information, as well as models that abandon the REH to use learning, heuristics, or subjective expectations.

When assimilation processes occur, expectations have a direct impact on experiences, and experiences bias the memory for prior expectations. Reports the results of two studies which examine assimilation processes using path analysis. Formulates implications and recommendations for service management and for research.

The purpose of this study is to examine the satisfaction formation process under conditions of varying involvement for new, nontraditional, credence‐based service offerings.

Hypotheses were tested using an on‐line simulation of a service encounter, beginning with perceptions of an advertisement and continuing through satisfaction with the completed service report. ElderCare, an assurance service provided by Certified Public Accountants to the children of an elderly parent, was the context of study.

The findings indicated expectations were not influential in the satisfaction formation process for these services, regardless of involvement. Under conditions of high involvement, performance evaluation was the dominant predictor of satisfaction. Low‐involvement subjects used disconfirmation to assess satisfaction.

Limitations of the research stem from the use of a convenience sample in a simulated service encounter. Future research should examine the influence of individual characteristics, particularly innovation, on the results. Additional research examining the determinants of model variables, from disconfirmation to involvement, across subjects in a variety of situations would also be valuable.

This research suggests a heightened need to guide the consumer experience where expectations are hard to develop and performance is hard to evaluate. Providers should carefully spell out key service dimensions, provide tangible information about performance outcomes for high‐involvement individuals, and focus on emotional appeals, provider qualities and sensory aspects of the service for low‐involvement individuals.

This paper helps researchers and practitioners better understand the applicability of expectancy disconfirmation theory and role of involvement in the context of new, nontraditional, credence‐based services.