Bubbles, Crashes and Endogenous Uncertainty in Linked Asset and Product Markets

Erik Kimbrough and Taylor Jaworski

Discussion Papers from Department of Economics, Simon Fraser University

Abstract: In laboratory asset markets, subjects trade shares of a firm whose profits in a linked product market determine dividends. Treatments vary whether dividend information is revealed once per period or in real-time and whether the firm is controlled by a profit-maximizing robot or human subject. The latter variation induces uncertainty about firm behavior, bridging the gap between laboratory and field markets. Our data replicate well-known features of laboratory asset markets (e.g. bubbles), suggesting these are robust to a market-based dividend process. Compared to a sample of previous experiments, both real-time information revelation and endogenous uncertainty impede the bubble-mitigating impact of experience.

Keywords: Asset Markets; Uncertainty; Experimental Economics (search for similar items in EconPapers)
JEL-codes: C91 D84 (search for similar items in EconPapers)
Pages: 48
Date: 2014-10-29
New Economics Papers: this item is included in nep-bec, nep-exp and nep-hme
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: BUBBLES, CRASHES, AND ENDOGENOUS UNCERTAINTY IN LINKED ASSET AND PRODUCT MARKETS* (2016)
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