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Design-features of bubble-prone experimental asset markets with a constant FV.

ABSTRACT: Experimental asset markets with a constant fundamental value ( FV ) have grown in importance in recent years. A methodological examination of the robustness of experimental results in such a setting which has been shown to produce bubbles, however, is lacking. In a laboratory experiment with 280 subjects, we investigate whether specific design features are sufficient to influence experimental results. In detail, we (1) vary the visual representation of the price chart, and (2) provide subjects with full information about the FV process. We find overvaluation and bubble formation to be reduced when trading prices are displayed at the upper end of the price chart. Surprisingly, we do not find any effects when subjects have full information about the FV process.

SUBMITTER: Huber C

PROVIDER: S-EPMC6917638 | biostudies-literature | 2019

REPOSITORIES: biostudies-literature

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Design-features of bubble-prone experimental asset markets with a constant FV.

Huber Christoph C Bindra Parampreet C PC Kleinlercher Daniel D

Journal of the Economic Science Association 20190326 2

Experimental asset markets with a constant fundamental value ( F V ) have grown in importance in recent years. A methodological examination of the robustness of experimental results in such a setting which has been shown to produce bubbles, however, is lacking. In a laboratory experiment with 280 subjects, we investigate whether specific design features are sufficient to influence experimental results. In detail, we (1) vary the visual representation of the price chart, and (2) provide subjects ...[more]

PMID: 31894200

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Project description:Most societies prohibit some market transactions based on moral concerns, even when the exchanges would benefit the parties involved and would not create negative externalities. A prominent example is given by payments for human organs for transplantation, banned virtually everywhere despite long waiting lists and many deaths of patients who cannot find a donor. Recent research, however, has shown that individuals significantly increase their stated support for a regulated market for human organs when provided with information about the organ shortage and the potential beneficial effects a price mechanism. In this study we focused on payments for human organs and on another "repugnant" transaction, indoor prostitution, to address two questions: (A) Does providing general information on the welfare properties of prices and markets modify attitudes toward repugnant trades? (B) Does additional knowledge on the benefits of a price mechanism in a specific context affect attitudes toward price-based transactions in another context? By answering these questions, we can assess whether eliciting a market-oriented approach may lead to a relaxation of moral opposition to markets, and whether there is a cross-effect of information, in particular for morally controversial activities that, although different, share a reference to the "commercialization" of the human body. Relying on an online survey experiment with 5,324 U.S. residents, we found no effect of general information about market efficiency, consistent with morally controversial markets being accepted only when they are seen as a solution to a specific problem. We also found some cross-effects of information about a transaction on the acceptance of the other; however, the responses were mediated by the gender and (to a lesser extent) religiosity of the respondent--in particular, women exposed to information about legalizing prostitution reduced their stated support for regulated organ payments. We relate these findings to prior research and discuss implications for public policy.

Dataset Information

Design-features of bubble-prone experimental asset markets with a constant FV.

Publications

Design-features of bubble-prone experimental asset markets with a constant FV.

Similar Datasets

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