It is Not Just Confusion! Strategic Uncertainty in an Experimental Asset Market

32 Pages Posted: 9 Aug 2013 Last revised: 18 Dec 2013

See all articles by Eizo Akiyama

Eizo Akiyama

University of Tsukuba - Department of Social Systems and Management

Nobuyuki Hanaki

Université Côte d'Azur, CNRS, GREDEG

Ryuichiro Ishikawa

Waseda University-SILS

Multiple version iconThere are 2 versions of this paper

Date Written: August 8, 2013

Abstract

To what extent is the observed mis-pricing in experimental asset markets caused by strategic uncertainty (SU) and by individual bounded rationality (IBR)? We address this question by comparing subjects’ initial price forecasts in two market environments -- one with six human traders, and the other with one human and five computer traders. We find that both SU and IBR account equally for the median initial forecasts’ deviation from the fundamental values. The effect of SU is greater for subjects with a perfect score in the Cognitive Reflection Test, and it is not significant for those with low scores.

Keywords: Bounded rationality, Strategic uncertainty, Experiment, Asset markets, Computer traders, Cognitive Reflection Test

JEL Classification: C90, D84

Suggested Citation

Akiyama, Eizo and Hanaki, Nobuyuki and Ishikawa, Ryuichiro, It is Not Just Confusion! Strategic Uncertainty in an Experimental Asset Market (August 8, 2013). Available at SSRN: https://ssrn.com/abstract=2307791 or http://dx.doi.org/10.2139/ssrn.2307791

Eizo Akiyama

University of Tsukuba - Department of Social Systems and Management ( email )

Japan

Nobuyuki Hanaki (Contact Author)

Université Côte d'Azur, CNRS, GREDEG

250 Rue Albert Einstein
Valbonne, 06560
France

Ryuichiro Ishikawa

Waseda University-SILS ( email )

Shinjuku, Tokyo 1658050
Japan

HOME PAGE: http://www.f.waseda.jp/r.ishikawa/

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