Symmetric Information Bubbles: Experimental Evidence

This study experimentally analyses traders’choices, with and without asymmetric
information, based on the riding-bubble model. While asymmetric information has been
necessary to explain a bubble in past theoretical models, our experiments show that
traders have an incentive to hold a bubble asset for longer, thereby expanding the
bubble in a market with symmetric, rather than asymmetric information. This finding
implies a possibility that information symmetry promotes cooperation. However, when
traders are more experienced, the size of the bubble decreases, in which case bubbles
do not arise, even with symmetric information.