The Bubble Game: A classroom experiment

We propose a simple classroom experiment on speculative bubbles: the Bubble Game. This game is useful to discuss about market efficiency and trading strategies in a financial economics course, and about behavioral aspects in a game theory course, at all levels. The Bubble Game can be played with any number of students, as long as this number is strictly greater than one. Students sequentially trade an asset which is publicly known to have a fundamental value of zero. If there is no cap on asset prices, speculative bubbles can arise at the Nash equilibrium because no trader is ever sure to be last in the market sequence. Otherwise, the Nash equilibrium involves no trade. Bubbles usually occur with or without a cap on prices. Traders who are less likely to be last and have less steps of reasoning to perform to reach equilibrium are in general more likely to speculate

Rational and Irrational Bubbles: an Experiment

This paper proposes a theory of rational bubbles in an economy with finite trading opportunities. Bubbles arise because agents are never sure to be last in the market sequence. This theory is used to design an experimental setting in which bubbles can be made rational or irrational by varying one parameter. This complements the experimental literature on irrational bubbles initiated by Smith, Suchanek and Williams (1988). Our experimental results suggest that it is pretty difficult to coordinate on rational bubbles even in an environment where irrational bubbles flourish. Maximum likelihood estimations show that these results can be reconciled within the context of Camerer, Ho, and Chong (2004)'s cognitive hierarchy model, and Mc Kelvey and Palfrey (1995)'s quantal response equilibrium

Rational and Irrational Bubbles: an Experiment

This paper proposes a theory of rational bubbles in an economy with finite trading opportunities. Bubbles arise because agents are never sure to be last in the market sequence. This theory is used to design an experimental setting in which bubbles can be made rational or irrational by varying one parameter. This complements the experimental literature on irrational bubbles initiated by Smith, Suchanek and Williams (1988). Our experimental results suggest that it is pretty difficult to coordinate on rational bubbles even in an environment where irrational bubbles flourish. Maximum likelihood estimations show that these results can be reconciled within the context of Camerer, Ho, and Chong (2004)'s cognitive hierarchy model, and Mc Kelvey and Palfrey (1995)'s quantal response equilibrium

Learning in Speculative Bubbles: An Experiment

Does traders' experience reduce their propensity to participate in speculate bubbles? This paper studies this issue from a theoretical and an experimental viewpoint. We focus on a game in which bubbles, if they arise, are irrational, as in the Smith, Suchanek, and Williams (1988)'s set up. Our theoretical results are based on Camerer and Ho (1999)'s Experience-Weighted Attraction learning model. Adaptive traders are assumed to adjust their behavior according to actions' past performance. In the long run, learning induces the market to converge to the unique no bubble equilibrium. However, learning initially increases traders' propensity to speculate. In the short run, more experienced traders thus create more bubbles. An experiment shows that bubbles are very pervasive despite the fact that subjects have become experienced. Our estimation of the EWA model also indicates that learning is at work

Learning in Speculative Bubbles: An Experiment

Does traders' experience reduce their propensity to participate in speculate bubbles? This paper studies this issue from a theoretical and an experimental viewpoint. We focus on a game in which bubbles, if they arise, are irrational, as in the Smith, Suchanek, and Williams (1988)'s set up. Our theoretical results are based on Camerer and Ho (1999)'s Experience-Weighted Attraction learning model. Adaptive traders are assumed to adjust their behavior according to actions' past performance. In the long run, learning induces the market to converge to the unique no bubble equilibrium. However, learning initially increases traders' propensity to speculate. In the short run, more experienced traders thus create more bubbles. An experiment shows that bubbles are very pervasive despite the fact that subjects have become experienced. Our estimation of the EWA model also indicates that learning is at work

From compressibility to structural investigation of sodium dodecyl sulphate — Part 1: Powder and tablet physico-chemical characteristics

As a part of a study on detergent tablets, investigations were carried out to elucidate the compression behavior of a powdered surfactant, sodium dodecyl sulphate (SDS), based on a comparison with the main component of the formulation, i.e. the chorine provider (DCCNa). The compacted SDS exhibited poor cohesion as well as delayed dissolution whatever the compression pressure. The microscopic observations and the mercury porosimetry measurements both demonstrated that a residual porosity existed in the tablets but the dissolution times were always long. A modification of SDS in contact with water, forming a structure like a gel, probably occurred, inducing the closing of the pores and thereby limiting the water intrusion into the tablets

A Fragile Balance: Perturbation of GABA Mediated Circuit in Prefrontal Cortex Generates High Intraindividual Performance Variability

High intraindividual performance variability is one of the most robust findings to emerge in cognitive-experimental research of attention deficit hyperactivity disorder (ADHD). Evidences from studies incorporating structural or functional human brain mapping methods indicate that this increased intraindividual variability is not simply a sequel of general brain dysfunction, but is likely related to the functioning of neural circuits that engage the prefrontal cortex, particularly the dorsolateral areas (dlPFC). In order to examine further the anatomical and pharmacological substrate responsible for this high intraindividual variability disorder, we injected GABAA antagonist (bicuculline) or GABAA agonist (muscimol) in the dlPFC of monkeys performing a reflexive oculomotor task. Here we show that, whereas GABAA agonist injection induced no or minimal impairments, injection of GABAA antagonist dramatically increased the intraindividual variability of saccade response time and of saccade spatial accuracy (amplitude and direction). Overall, this study demonstrates that the balance between excitatory/inhibitory activities in the dlPFC is fragile but crucial, since local micro-injection of GABAA antagonist can induce marked behavioural effects. It also reveals that higher cognitive areas such as the dlPFC are markedly capable to influence the productions and metrics of reflexive movements. Altogether, this study provides promising perspectives for the development of new therapeutic strategies for the treatment of diseases in which high intravariability disorders are a prominent feature

From compressibility to structural investigation of sodium dodecyl sulphate — Part 2: A singular behavior under pressure

Investigations were carried out to elucidate the compression behavior of a powdered surfactant, sodium dodecyl sulphate (SDS), based on a comparison with the main component of a detergent formulation, i.e. the chorine provider (DCCNa). The energetic analysis based on the compression cycles highlighted a lower compressibility of SDS compared with DCCNa, especially due to its worse packing ability, larger elasticity and bad cohesion ability. Also, it pointed out that the pycnometric density seemed to be overrun under pressure whereas a residual porosity had been evidenced in the expanded tablets. DSC/DTA analysis, Raman spectroscopy as well as powder X-ray diffraction refuted the hypothesis of a physico-chemical transformation of SDS under pressure. This was in accordance with the morphology of the SDS particles, quite unchanged after compression. The pycnometric density measurements have been improved; firstly, it allowed to properly express the compaction ratio of the ejected SDS tablets, and secondly, it led to conclude to a reversible intrinsic compressibility for pressures higher than 50 MPa, explained by the predominant elastic behavior of SDS