An Experimental Study of Bubble Formation in Asset Markets Using the Tâtonnement Pricing Mechanism
AbstractWe report the results of an experiment designed to study the role of institutional structure in the formation of bubbles and crashes in laboratory asset markets. In a setting employing double auctions and call markets as trading institutions, bubbles and crashes are a quite robust phenomenon. The only factor appearing to reduce bubbles is experience across markets. In this study, we employ the tâtonnement trading institution, which has not been previously explored in laboratory asset markets. The results show that bubbles are eliminated, suggesting that the trading institution plays a crucial role in the formation of bubbles.
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Bibliographic InfoPaper provided by University of Canterbury, Department of Economics and Finance in its series Working Papers in Economics with number 09/19.
Length: 34 pages
Date of creation: 20 Nov 2009
Date of revision:
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Bubbles; Trading Institutions; Pricing Mechanisms; Tâtonnement;
Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
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