Two Heads are Less Bubbly than One: Team Decision-Making in an Experimental Asset Market

42 Pages Posted: 2 Nov 2009

See all articles by Stephen L. Cheung

Stephen L. Cheung

The University of Sydney; IZA Institute of Labor Economics

Stefan Palan

University of Graz


We study the effect of team decision-making on bubbles and crashes in experimental asset markets of the kind introduced by Smith, Suchanek and Williams (1988). We find that populating such markets with teams of size two instead of individuals significantly reduces the severity of mispricing. In particular we observe that under our teams treatment, deviations in prices away from intrinsic value are significantly smaller in magnitude, shorter in duration and associated with lower volume and price volatility. We also find an unexpected gender effect in team composition, manifesting itself in more extreme - though not consistently more profitable - behaviour by all-male teams. Since these effects are not observed among male participants generally, we conjecture that they may be due to factors specific to the psychology of decision-making in male-dominated environments.

Keywords: asset market experiments, price bubbles, group decision-making, gender composition of teams

JEL Classification: C92, D70, G12

Suggested Citation

Cheung, Stephen L. and Palan, Stefan, Two Heads are Less Bubbly than One: Team Decision-Making in an Experimental Asset Market. IZA Discussion Paper No. 4507, Available at SSRN: or

Stephen L. Cheung (Contact Author)

The University of Sydney ( email )

School of Economics
Social Sciences Building A02
Sydney, NSW 2006
+61 2 9351 2135 (Phone)
+61 2 9351 4341 (Fax)

HOME PAGE: http://

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072

Stefan Palan

University of Graz ( email )

Universitaetsstrasse 15/F2
Graz, 8010
+433163807306 (Phone)


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