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Asset Pricing and Risk Sharing in Complete Markets: An Experimental Investigation1

Author

Listed:
  • Bruno Biais

    (HEC Paris - Ecole des Hautes Etudes Commerciales)

  • Sophie Moinas

    (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)

  • Sebastien Pouget

    (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)

  • 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)

Abstract

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

Suggested Citation

  • Bruno Biais & Sophie Moinas & Sebastien Pouget & Thomas Mariotti, 2026. "Asset Pricing and Risk Sharing in Complete Markets: An Experimental Investigation1," Working Papers hal-05610601, HAL.
    • Handle: RePEc:hal:wpaper:hal-05610601
    DOI: 10.2139/ssrn.6388957
    as

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