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It is Not Just Confusion! Strategic Uncertainty in an Experimental Asset Market

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To what extent is the observed mis-pricing in experimental asset markets caused by strategic uncertainty (SU) and by individual bounded rationality (IBR)? We address this question by comparing subjects initial price forecasts in two market environments – one with six human traders, and the other with one human and five computer traders. We find that both SU and IBR account equally for the median initial forecasts deviation from the fundamental values. The effect of SU is greater for subjects with a perfect score in the Cognitive Reflection Test, and it is not significant for those with low scores.

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  • Eizo Akiyama & Nobuyuki Hanaki & Ryuichiro Ishikawa, 2013. "It is Not Just Confusion! Strategic Uncertainty in an Experimental Asset Market," AMSE Working Papers 1340, Aix-Marseille School of Economics, France, revised 08 Aug 2013.
  • Handle: RePEc:aim:wpaimx:1340
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    More about this item

    Keywords

    Bounded rationality; Strategic uncertainty; Experiment; Asset markets; Computer traders; Cognitive Re?ection Test;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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