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Bubbles and Experience: An Experiment

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  • Martin Dufwenberg
  • Tobias Lindqvist
  • Evan Moore

Abstract

We investigate the occurrence of bubble-crash pricing patterns in laboratory financial markets with a mixture of experienced and inexperienced traders. We find that even with a minority of experienced traders, bubbles are substantially abated.

Suggested Citation

  • Martin Dufwenberg & Tobias Lindqvist & Evan Moore, 2005. "Bubbles and Experience: An Experiment," American Economic Review, American Economic Association, vol. 95(5), pages 1731-1737, December.
  • Handle: RePEc:aea:aecrev:v:95:y:2005:i:5:p:1731-1737
    Note: DOI: 10.1257/000282805775014362
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    References listed on IDEAS

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    5. Vernon L. Smith, 1962. "An Experimental Study of Competitive Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 70, pages 111-111.
    6. 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.
    7. Peterson, Steven P., 1993. "Forecasting dynamics and convergence to market fundamentals : Evidence from experimental asset markets," Journal of Economic Behavior & Organization, Elsevier, vol. 22(3), pages 269-284, December.
    8. Charles Noussair & Steven Tucker, 2006. "Futures Markets And Bubble Formation In Experimental Asset Markets," Pacific Economic Review, Wiley Blackwell, vol. 11(2), pages 167-184, June.
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