No-Trade in the Laboratory

69 Pages Posted: 28 Oct 2008

See all articles by Marco Angrisani

Marco Angrisani

Center for Economic and Social Research (CESR)

Antonio Guarino

University College London - Centre for Economic Learning and Social Evolution (ELSE)

Steffen Huck

University College London - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Nathan Larson

American University

Date Written: October 2008

Abstract

We test the no-trade theorem in a laboratory financial market where subjects can trade an asset whose value is unknown. Subjects receive clues on the asset value and then set a bid and an ask at which they are willing to buy or to sell from the other participants. In treatments with no gains from trade, theory predicts no trading activity, whereas, in treatments with gains, trade becomes theoretically possible. Our experimental results show that subjects fail to reach the no-trade equilibrium by pure introspection, but they learn to approach it over time, through market feedback and learning.

Keywords: no-trade theorem, experiment

JEL Classification: C92, D8, G12, G14

Suggested Citation

Angrisani, Marco and Guarino, Antonio and Huck, Steffen and Larson, Nathan, No-Trade in the Laboratory (October 2008). CESifo Working Paper Series No. 2436. Available at SSRN: https://ssrn.com/abstract=1291109

Marco Angrisani

Center for Economic and Social Research (CESR) ( email )

635 Downey Way
Los Angeles, CA 90089-3332
United States

Antonio Guarino

University College London - Centre for Economic Learning and Social Evolution (ELSE) ( email )

Gower Street
London WC1E 6BT
United Kingdom

HOME PAGE: http://www.homepages.ucl.ac.uk/~uctpagu/

Steffen Huck (Contact Author)

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom
+44 207 679 5895 (Phone)
+44 207 916 2774 (Fax)

HOME PAGE: http://www.ucl.ac.uk/~uctpshu/

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Nathan Larson

American University ( email )

4400 Massachusetts Avenue, N.W.
Washington, DC 20016-8029
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
41
Abstract Views
1,126
PlumX Metrics