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Asset Pricing and Risk Sharing in Complete Markets: An Experimental Investigation

Author

Listed:
  • Bruno Biais

    (HEC Paris - Recherche - Hors Laboratoire - HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Thomas Mariotti

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Sophie Moinas

    (Finance - CRM - Centre de Recherche en Management - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - IAE - Institut d'Administration des Entreprises - Toulouse - CNRS - Centre National de la Recherche Scientifique)

  • Sébastien Pouget

    (TSM - Toulouse School of Management Research - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - CNRS - Centre National de la Recherche Scientifique - TSM - Toulouse School of Management - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse)

Abstract

We study asset pricing and risk sharing in experimental financial markets designed to test rational choice and competitive behavior in complete markets. Participants behave competitively but deviate from rationality: approximately 25% of actions are first-order stochastically dominated. We propose a random-choice model predicting that market-clearing prices and average trades converge to the rational-choice competitive equilibrium as market size grows. Our experimental data support this convergence prediction. Structural estimation with CRRA utilities and logit choice probabilities reveals that approximately 20% of participants would have higher expected utility in autarky, suggesting bounded rationality can make market participation welfare-reducing for a significant minority.

Suggested Citation

  • Bruno Biais & Thomas Mariotti & Sophie Moinas & Sébastien Pouget, 2025. "Asset Pricing and Risk Sharing in Complete Markets: An Experimental Investigation," Working Papers hal-05475576, HAL.
    • Handle: RePEc:hal:wpaper:hal-05475576
    Note: View the original document on HAL open archive server: https://hal.science/hal-05475576v1
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