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

Author

Listed:
  • Eizo Akiyama

    (Faculty of Engineering, Information and Systems, University of Tsukuba - University of Tsukuba)

  • Nobuyuki Hanaki

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique)

  • Ryuichiro Ishikawa

    (Faculty of Engineering, Information and Systems, University of Tsukuba - University of Tsukuba)

Abstract

To what extent is the observed mispricing in experimental asset markets caused by strategic uncertainty and by confusion? 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 strategic uncertainty and confusion contribute equally to the median initial forecast deviation from the fundamental value. The effect of strategic uncertainty is greater for subjects with a perfect score in the Cognitive Reflection Test, and it is not significant for those with low scores.

Suggested Citation

  • Eizo Akiyama & Nobuyuki Hanaki & Ryuichiro Ishikawa, 2017. "It is Not Just Confusion! Strategic Uncertainty in an Experimental Asset Market," Post-Print halshs-01294917, HAL.
  • Handle: RePEc:hal:journl:halshs-01294917
    DOI: 10.1111/ecoj.12338
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01294917
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    File URL: https://halshs.archives-ouvertes.fr/halshs-01294917/document
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    Cited by:

    1. Shinichi Hirota & Juergen Huber & Thomas Stock & Shyam Sunder, 2018. "Speculation and Price Indeterminacy in Financial Markets: An Experimental Study," Cowles Foundation Discussion Papers 2134, Cowles Foundation for Research in Economics, Yale University.
    2. repec:eee:dyncon:v:88:y:2018:i:c:p:51-69 is not listed on IDEAS
    3. repec:eee:dyncon:v:88:y:2018:i:c:p:121-136 is not listed on IDEAS
    4. Butler, David & Cheung, Stephen L., 2018. "Mind, Body, Bubble! Psychological and Biophysical Dimensions of Behavior in Experimental Asset Markets," IZA Discussion Papers 11563, Institute for the Study of Labor (IZA).

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    Keywords

    Experiment; Strategic uncertainty; Bounded rationality; Asset markets; Computer traders; Cognitive Reflection Test;

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