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Symmetric information bubbles: Experimental evidence

Vol: 
CAMA Working Paper 5/2017
Author name: 
Asako, Y
Funaki, Y
Ueda, K
Uto, N
Year: 
2017
Month: 
January
Abstract: 

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.

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