An Experimental Study of Bubble Formation in Asset Markets Using the Tâtonnement Trading Institution
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, despite its historical and contemporary relevance. The results show that bubbles are significantly reduced, 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 11/07.
Length: 37 pages
Date of creation: 01 Jan 2011
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Experimental Asset Markets; Price Bubbles; Trading Institutions; Tâtonnement;
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- Van Boening, Mark V. & Williams, Arlington W. & LaMaster, Shawn, 1993. "Price bubbles and crashes in experimental call markets," Economics Letters, Elsevier, vol. 41(2), pages 179-185.
- Breaban, A. & Noussair, C.N., 2013.
"Emotional state and Market Behavior,"
2013-031, Tilburg University, Center for Economic Research.
- Giusti, Giovanni & Jiang, Janet Hua & Xu, Yiping, 2012. "Eliminating Laboratory Asset Bubbles by Paying Interest on Cash," MPRA Paper 37321, University Library of Munich, Germany.
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