No-Trade in the Laboratory

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No-Trade in the Laboratory

Author Info

Marco Angrisani ()
Antonio Guarino ()
Steffen Huck ()
Nathan Larson ()

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Abstract

We test the no-trade theorem in a laboratory financial market where subjects can trade an asset whose value is unknown. Subjects receive clues on the asset value and then set a bid and an ask at which they are willing to buy or to sell from the other participants. In treatments with no gains from trade, theory predicts no trading activity, whereas, in treatments with gains, trade becomes theoretically possible. Our experimental results show that subjects fail to reach the no-trade equilibrium by pure introspection, but they learn to approach it over time, through market feedback and learning.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2436.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2436

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Paper
- Marco Angrisani & Antonio Guarino & Steffen Huck & Nathan Larson, 2008. "No-Trade in the Laboratory," WEF Working Papers 0045, ESRC World Economy and Finance Research Programme, Birkbeck, University of London. [Downloadable!]

Find related papers by JEL classification:
C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies

References listed on IDEAS
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Other versions:
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Other versions:
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