Advice and Fictive Learning: The Pricing of Assets in the Laboratory

A burgeoning literature in the neurosciences suggests that individuals modify their behavior not only in response to their own experiences, but also from what they learn about the experiences of others engaged in similar tasks. Importantly, these different forms of learning are associated with common neurological processes. We explore whether others’ advice provides a fictive learning signal that substitutes for one’s own experience. We examine this question in an environment where inexperienced traders frequently perform poorly – an experimental asset market. Prices in sessions with advice tend towards fundamentals mitigating the severity of price bubbles. Further, advice allays behaviors shown to yield bubbles in prior studies. Taken jointly, our data suggest that advice triggers fictive learning which helps agents avoid the “mistakes” made by naïve counterparts.