Trading Gamification and Investor Behavior

Abstract

We study the effect of gamification on retail traders' behavior using a randomized online experiment. Participants with lower financial literacy prefer platforms with hedonic gamification elements, such as confetti and achievement badges. On average, hedonic gamification increases trading volume by 5.17%. However, the difference in trading activity between gamified and non-gamified platforms is driven primarily by self-selection (70%) rather than gamification (30%). Participants who prefer hedonic gamification exhibit noisy trading strategies, while those favoring non-gamified platforms display stronger contrarian behavior. Further, price trend notifications enhance learning for investors with accurate beliefs, but reinforce trading mistakes for those with incorrect beliefs.

Keywords: gamification, risk, experimental finance, financial literacy, retail trading

JEL Classification: C91, G11, G41, G53