ABSTRACT
Most economic theories explain decision-making with reference to a single model of expectation formation. This approach suffers from analytical limitations, especially when applied to different economic situations and historical circumstances. We therefore propose a concept that does not deny the diversity of observable strategies of expectation formation but uses it to explain the complex behavior of actors in various decision-making situations. We refer to this approach as “contingent expectations” and argue that agents can and do choose between different ways of forming expectations. In a given decision-making situation, actors’ experiences, the cost of acquiring and processing additional information, the variation in possible outcomes of the decision, and the degree of irreducible uncertainty determine the choice of expectation formation strategy.
