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Speculation rather than enterprise? Keynes' beauty contest revisited in theory and experiment

Listed author(s):
  • Kene Boun My

    (BETA - Bureau d'Economie Théorique et Appliquée - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

  • Camille Cornand

    (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - UJM - Université Jean Monnet [Saint-Etienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique)

  • Rodolphe Dos Santos Ferreira

    (BETA - Bureau d'Economie Théorique et Appliquée - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

In Keynes' beauty contest, agents make evaluations reflecting both an expected fundamental value and the conventional value expected to be set by the market. They thus respond to fundamental and coordination motives, respectively, the prevalence of either being set exogenously. Our contribution is twofold. First, we propose a valuation game in which agents strategically choose how to weight each motive. This game emphasises public information leads agents to favour the coordination motive. Second, we test the game through a laboratory experiment. Subjects tend to conform to theoretical predictions, except when fundamental uncertainty is low relative to strategic uncertainty. Abstract In Keynes' beauty contest, agents make evaluations reflecting both an expected fun

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Paper provided by HAL in its series Post-Print with number halshs-01569164.

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Date of creation: 29 May 2017
Publication status: Published in Séminaire Co-ordination in Economics, Fondation Les Treilles, Tourtour, 29 mai-3 juin 2017, May 2017, Tourtour, France
Handle: RePEc:hal:journl:halshs-01569164
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01569164
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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  1. Baeriswyl Romain & Cornand Camille, 2016. "The Predominant Role of Signal Precision in Experimental Beauty Contests," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 16(1), pages 267-301, January.
  2. Romain Baeriswyl & Camille Cornand, 2014. "Reducing Overreaction To Central Banks' Disclosures: Theory And Experiment," Journal of the European Economic Association, European Economic Association, vol. 12(4), pages 1087-1126, August.
  3. Romain Baeriswyl & Camille Cornand, 2014. "Reducing Overreaction To Central Banks' Disclosures: Theory And Experiment," Journal of the European Economic Association, European Economic Association, vol. 12(4), pages 1087-1126, August.
  4. Romain Baeriswyl & Camille Cornand, 2014. "Reducing Overreaction To Central Banks' Disclosures: Theory And Experiment," Journal of the European Economic Association, European Economic Association, vol. 12(4), pages 1087-1126, August.
  5. Romain Baeriswyl & Camille Cornand, 2014. "Reducing Overreaction To Central Banks' Disclosures: Theory And Experiment," Journal of the European Economic Association, European Economic Association, vol. 12(4), pages 1087-1126, 08.
  6. Antonio Cabrales & Rosemarie Nagel & Roc Armenter, 2007. "Equilibrium selection through incomplete information in coordination games: an experimental study," Experimental Economics, Springer;Economic Science Association, vol. 10(3), pages 221-234, September.
  7. Simone Alfarano & Andrea Morone & Eva Camacho, 2011. "The role of public and private information in a laboratory financial market," Working Papers. Serie AD 2011-06, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  8. Menno Middeldorp & Stephanie Rosenkranz, 2011. "Central bank transparency and the crowding out of private information in an experimental asset market," Staff Reports 487, Federal Reserve Bank of New York.
  9. Frank Heinemann & Rosemarie Nagel & Peter Ockenfels, 2004. "The Theory of Global Games on Test: Experimental Analysis of Coordination Games with Public and Private Information," Econometrica, Econometric Society, vol. 72(5), pages 1583-1599, 09.
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