Price expectations in the laboratory in positive and negative feedback systems
We analyse the results of a laboratory experiment on expectation formation. Participants were asked to predict prices in an artificial single-good economy, and were paid according to their forecasting accuracy. Thirteen markets, with six subjects each, were created, in two different treatments. The first treatment concerns a Cobweb-like commodity market with supply-driven expectations feedback. The second treatment concerns a speculative asset market with demanddriven expectations feedback. In the first treatment price fluctuations are relatively stable, quickly converging to the Rational Expectations fundamental value. In the second treatment prices do not converge quickly, but tend to display a slow oscillation around the fundamental price. An important factor in generating these differences is shown to be the strong coordination of price predictions among participants. This suggests a large degree of homogeneity in the expectation rules applied by the participants, which was confirmed by explicitly fitting the individual predictions to a linear adaptive autoregressive specification
|Date of creation:||11 Nov 2005|
|Date of revision:|
|Contact details of provider:|| Web page: http://comp-econ.org/|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brock, W.A. & Hommes, C.H., 1996.
"A Rational Route to Randomness,"
9530r, Wisconsin Madison - Social Systems.
- Smith, Vernon L & Suchanek, Gerry L & Williams, Arlington W, 1988. "Bubbles, Crashes, and Endogenous Expectations in Experimental Spot Asset Markets," Econometrica, Econometric Society, vol. 56(5), pages 1119-51, September.
- Giulio Bottazzi & Giovanna Devetag, 2005.
"Expectations structure in asset pricing experiments,"
CEEL Working Papers
0503, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
- Giulio Bottazzi & Maria Giovanna Devetag, 2003. "Expectations Structure in Asset Pricing Experiments," LEM Papers Series 2003/19, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
- Giulio Bottazzi & Giovanna Devetag, 2003. "Expectations Structure in Asset Pricing Experiments," ROCK Working Papers 022, Department of Computer and Management Sciences, University of Trento, Italy, revised 12 Jun 2008.
- Lei, Vivian & Noussair, Charles N & Plott, Charles R, 2001.
"Nonspeculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality vs. Actual Irrationality,"
Econometric Society, vol. 69(4), pages 831-59, July.
- Lei, V. & Noussair, C. & Plott, C.R., 1998. "Non-Speculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality Vs. Actual Irrationality," Purdue University Economics Working Papers 1120, Purdue University, Department of Economics.
- Schmalensee, Richard, 1976. "An Experimental Study of Expectation Formation," Econometrica, Econometric Society, vol. 44(1), pages 17-41, January.
When requesting a correction, please mention this item's handle: RePEc:sce:scecf5:165. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.