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The Interactive Minority Game: a Web based investigation of human market interactions

Author

Listed:
  • Paolo Laureti

    (Fribourg University, Switzerland)

  • Peter Ruch

    (Fribourg University, Switzerland)

  • Joseph Wakeling

    (Fribourg University, Switzerland)

  • Yi-Cheng Zhang

    (Fribourg University, Switzerland)

Abstract

The unprecedented access offered by the World Wide Web brings with it the potential to gather huge amounts of data on human activities. Here we exploit this by using a toy model of financial markets, the Minority Game (MG), to investigate human speculative trading behaviour and information capacity. Hundreds of individuals have played a total of tens of thousands of game turns against computer-controlled agents in the Web-based Interactive Minority Game. The analytical understanding of the MG permits fine-tuning of the market situations encountered, allowing for investigation of human behaviour in a variety of controlled environments. In particular, our results indicate a transition in players' decision-making, as the markets become more difficult, between deductive behaviour making use of short-term trends in the market, and highly repetitive behaviour that ignores entirely the market history, yet outperforms random decision-making.

Suggested Citation

  • Paolo Laureti & Peter Ruch & Joseph Wakeling & Yi-Cheng Zhang, 2004. "The Interactive Minority Game: a Web based investigation of human market interactions," Experimental 0402004, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpex:0402004
    Note: Type of Document - pdf; prepared on WinXP; pages: 13; figures: 5
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/exp/papers/0402/0402004.pdf
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    References listed on IDEAS

    as
    1. Płatkowski, Tadeusz & Ramsza, Michał, 2003. "Playing minority game," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 323(C), pages 726-734.
    2. Giulio Bottazzi & Giovanna Devetag, 2002. "Coordination and self-organization in minority games: experimental evidence," CEEL Working Papers 0215, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    3. Marsili, Matteo & Challet, Damien & Zecchina, Riccardo, 2000. "Exact solution of a modified El Farol's bar problem: Efficiency and the role of market impact," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 280(3), pages 522-553.
    4. Lucas, Robert E, Jr, 1986. "Adaptive Behavior and Economic Theory," The Journal of Business, University of Chicago Press, vol. 59(4), pages 401-426, October.
    5. Arthur, W Brian, 1994. "Inductive Reasoning and Bounded Rationality," American Economic Review, American Economic Association, vol. 84(2), pages 406-411, May.
    6. Challet, Damien & Marsili, Matteo & Zhang, Yi-Cheng, 2000. "Modeling market mechanism with minority game," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 276(1), pages 284-315.
    7. Challet, D. & Zhang, Y.-C., 1997. "Emergence of cooperation and organization in an evolutionary game," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 246(3), pages 407-418.
    8. Ernst Fehr & Simon Gaechter, 2003. "Altruistic Punishment in Humans," Microeconomics 0305006, EconWPA.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Christian Borghesi & Jean-Philippe Bouchaud, 2007. "Of songs and men: a model for multiple choice with herding," Quality & Quantity: International Journal of Methodology, Springer, vol. 41(4), pages 557-568, August.

    More about this item

    Keywords

    Experimental economics and financial markets; Decision theory and game theory; Information theory;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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