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BUBBLES, CRASHES, AND ENDOGENOUS UNCERTAINTY IN LINKED ASSET AND PRODUCT MARKETS*
Author(s) -
Jaworski Taylor,
Kimbrough Erik O.
Publication year - 2016
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12151
Subject(s) - dividend , asset (computer security) , product market , economics , replicate , profit (economics) , financial economics , business , econometrics , monetary economics , microeconomics , finance , computer science , statistics , computer security , mathematics , incentive
In laboratory asset markets, subjects trade shares of a firm whose profits in a linked product market determine dividends. Treatments vary whether dividend information is revealed once per period or in real time and whether the firm is controlled by a profit‐maximizing robot or human subject. The latter variation induces uncertainty about firm behavior, bridging the gap between laboratory and field markets. Our data replicate well‐known features of laboratory asset markets (e.g., bubbles), suggesting these are robust to a market‐based dividend process. Compared to a sample of previous experiments, both real‐time information revelation and endogenous uncertainty impede the bubble‐mitigating impact of experience.