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Symmetric Information Bubbles: Experimental Evidence

Author

Listed:
  • Yasushi Asako
  • Yukihiko Funaki
  • Kozo Ueda
  • Nobuyuki Uto

Abstract

This study experimentally analyses traders’choices, with and without asymmetric information, based on the riding-bubble model. While asymmetric information has been necessary to explain a bubble in past theoretical models, our experiments show that traders have an incentive to hold a bubble asset for longer, thereby expanding the bubble in a market with symmetric, rather than asymmetric information. This finding implies a possibility that information symmetry promotes cooperation. However, when traders are more experienced, the size of the bubble decreases, in which case bubbles do not arise, even with symmetric information.

Suggested Citation

  • Yasushi Asako & Yukihiko Funaki & Kozo Ueda & Nobuyuki Uto, 2017. "Symmetric Information Bubbles: Experimental Evidence," CAMA Working Papers 2017-05, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2017-05
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    File URL: https://crawford.anu.edu.au/sites/default/files/2025-02/5_2017_asako_funaki_ueda_uto.pdf
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    Cited by:

    1. is not listed on IDEAS
    2. Chan, Joshua C.C. & Santi, Caterina, 2021. "Speculative bubbles in present-value models: A Bayesian Markov-switching state space approach," Journal of Economic Dynamics and Control, Elsevier, vol. 127(C).
    3. Herzing, Tobias J. & Muck, Matthias, 2024. "Can you keep a secret? The dissemination of false rumors and the evolution of bubbles in perceived predatory trading games," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    4. Bao, Te, 2022. "Comments on “the role of information in a continuous double auction: An experiment and learning model” by Mikhail Anufriev, Jasmina Arifovic, John Ledyard and Valentyn Panchenko," Journal of Economic Dynamics and Control, Elsevier, vol. 141(C).

    More about this item

    Keywords

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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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