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Sunspots in the Laboratory

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  • John Duffy
  • Eric O'N. Fisher

Abstract

We show that extrinsic or nonfundamental uncertainty influences markets in a controlled environment. This work provides the first direct evidence of sunspot equilibria. These equilibria require a common understanding of the semantics of the sunspot variable, and they appear to be sensitive to the flow of information. Sunspots always occur in a closed-book call market, but they happen only occasionally in a double auction, where inframarginal bids and offers are observable.

Suggested Citation

  • John Duffy & Eric O'N. Fisher, 2005. "Sunspots in the Laboratory," American Economic Review, American Economic Association, vol. 95(3), pages 510-529, June.
    • Handle: RePEc:aea:aecrev:v:95:y:2005:i:3:p:510-529
    Note: DOI: 10.1257/0002828054201350
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    References listed on IDEAS

    as
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