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

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

League-Table Incentives and Price Bubbles in Experimental Asset Markets

We study experimental markets in which participants face incentives modeled upon those prevailing in markets for managed funds. Each participant's portfolio is periodically evaluated at market value and ranked in a league table according to short-term paper returns. Those who rank highly attract a larger share of new fund inflows. Under conditions in which prices are close to intrinsic value, the effect of incentives is mild. However under conditions in which markets are prone to bubble, mispricing is greatly exacerbated by incentives. Even in experienced markets, prices climb to levels clearly indicative of speculation and do not always crash back.league tables, price bubbles, managed funds markets, tournament incentives, asset market experiments

Two heads are less bubbly than one: Team decision-making in an experimental asset market

In the world of mutual funds management, responsibility for investment decisions is increasingly entrusted to small teams instead of individuals. Yet the effect of team decision-making in a market environment has never been studied in a controlled experiment. In this paper, we investigate the effect of team decision-making in an asset market experiment that has long been known to reliably generate price bubbles and crashes in markets populated by individuals. We find that this tendency is substantially reduced when each decision-making unit is instead a team of two. This holds across a broad spectrum of measures of the severity of mispricing, both under a continuous double-auction institution and in a call market. The result is not driven by reduced turnover due to time required for deliberation by teams, and continues to hold even when subjects are experienced. Our result also holds not only when our teams treatments are compared to the ‘narrow' baseline provided by the corresponding individuals treatments, but also when compared more broadly to the results of the large body of previous research on markets of this kind.group decision-making; price bubbles; asset market experiments

On the Elicitation of Time Preference under Conditions of Risk

Andreoni and Sprenger (2012) report evidence that distinct utility functions govern choices under certainty and risk. I investigate the robustness of this result to the experimental design. I find that the effect disappears completely when a multiple price list instrument is used instead of a convex time budget design. Alternatively, the effect is reduced by half when sooner and later payment risks are realized using a single lottery instead of two independent lotteries. The result is thus at least partially driven by intertemporal diversification, supporting an explanation in terms of concavity of the intertemporal, and not only atemporal, utility function

New Insights into Conditional Cooperation and Punishment from a Strategy Method Experiment

This paper introduces new experimental designs to examine how conditional cooperation and punishment behaviours respond to the full range of variation in the contributions of others. It is shown that contributions become significantly more selfish-biased as others contribute more unequally, while punishment increases both with decreasing contributions by the target player and increasing contributions by a third player. Low contributors who punish antisocially do not direct their punishment specifically toward high contributors, while their beliefs indicate that they expect to themselves be punished

New Insights into Conditional Cooperation and Punishment from a Strategy Method Experiment

This paper introduces new experimental designs to enrich understanding of conditional cooperation and punishment in public good games. The key to these methods is to elicit complete contribution or punishment profiles using the strategy method. It is found that the selfish bias in conditional cooperation is made significantly worse when other players contribute more unequally. Contingent punishment strategies are found to increase with decreasing contributions by the target player and also increasing contributions by a third player. "Antisocial" punishments are not directed specifically toward high contributors, but may be motivated by pre-emptive retaliation against punishment a player expects to incur.conditional cooperation, selfish bias, punishment, public good experiment, strategy method

To See Is To Believe: Common Expectations In Experimental Asset Markets

We experimentally manipulate agents' information regarding the rationality of others in a setting in which previous studies have found irrationality to be present, namely the asset market experiments introduced by Smith, Suchanek, and Williams (Econometrica, 1988). Recent studies suggest that mispricing in such markets may be an artefact of confusion, which can be reduced by training subjects to understand the diminishing fundamental value. We reconsider this view, and argue that when it is made public knowledge that training has occurred, this may also reduce uncertainty over the behavior of others and facilitate the formation of common expectations. Our design disentangles the direct effect of training from the indirect e_ect of its public knowledge, and our results indicate a distinct effect of public knowledge over and above that of training alon

Present bias for monetary and dietary rewards: evidence from Chinese teenagers

Economists model self-control problems through time-inconsistent preferences. Empirical tests of these preferences largely rely on experimental elicitation methods using monetary rewards, with several recent studies failing to find present bias for money. In this paper, we compare estimates of present bias for money with estimates for healthy and unhealthy foods. In a within-subjects longitudinal experiment with 697 low-income Chinese high school students we find strong present bias for both money and food, and that individual measures of present bias are moderately correlated across reward types. Our experimental measures of time preferences over money predict field behaviours better than preferences elicited over foods

Savings and Prize-Linked Savings Accounts

Many households have insufficient savings to handle moderate and routine consumption shocks. Many of these financially-fragile households also have the highest lottery expenditures as a proportion of income. This combination suggests that Prize-Linked Savings (PLS) accounts, combining security of principal with lottery-type jackpots, can increase savings among these at-risk households. Results from an online experiment show that the introduction of PLS accounts increase total savings and reduce lottery expenditures significantly, especially among individuals with the lowest levels of savings and income. The results imply that PLS accounts offer a plausible market-based solution to encourage individuals to increase savings

An integrated information retrieval and document management system

This paper describes the requirements and prototype development for an intelligent document management and information retrieval system that will be capable of handling millions of pages of text or other data. Technologies for scanning, Optical Character Recognition (OCR), magneto-optical storage, and multiplatform retrieval using a Standard Query Language (SQL) will be discussed. The semantic ambiguity inherent in the English language is somewhat compensated-for through the use of coefficients or weighting factors for partial synonyms. Such coefficients are used both for defining structured query trees for routine queries and for establishing long-term interest profiles that can be used on a regular basis to alert individual users to the presence of relevant documents that may have just arrived from an external source, such as a news wire service. Although this attempt at evidential reasoning is limited in comparison with the latest developments in AI Expert Systems technology, it has the advantage of being commercially available