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Speculating in zero-value assets: The greater fool game experiment

Author

Listed:
  • Holzknecht, Armando
  • Huber, Jürgen
  • Kirchler, Michael
  • Neugebauer, Tibor

Abstract

In a pre-registered laboratory asset market study, we investigate dynamics of asset markets with zero (or close to zero) fundamental values. We introduce the “greater fool asset market game” with a zero-value token, whose price doubles in each period. We design several treatments, which differ in terms of whether the fundamental value is zero for sure (Baseline), and whether the very low probability of non-zero fundamentals is known (Risk) or not (Ambiguity). We find that prices in markets with zero fundamental value are clearly above zero. Furthermore, we report that prices in treatment Ambiguity are substantially higher than those in treatments Baseline and Risk. Finally, we show that beliefs regarding the asset’s value and others’ participation explain individual market participation.

Suggested Citation

  • Holzknecht, Armando & Huber, Jürgen & Kirchler, Michael & Neugebauer, Tibor, 2025. "Speculating in zero-value assets: The greater fool game experiment," European Economic Review, Elsevier, vol. 180(C).
    • Handle: RePEc:eee:eecrev:v:180:y:2025:i:c:s0014292125002302
    DOI: 10.1016/j.euroecorev.2025.105180
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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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