We present a model in which an outside bank and a default penalty support the value of fiat money, and experimental evidence that the theoretical predictions about the behavior of such economies, based on the Fisher-condition, work reasonably well in a laboratory setting. The import of this...

We experimentally explore if the absence of dividend anchors (from which investors can backward induct to arrive at the fundamental value) may help us understand the formation of security price bubbles. The fundamental value models assume that the investors (a) form rational expectations,(b)...

We design and analyze experimental versions of monetary overlapping generations economies under alternative policy regimes. Economies with a constant level of real deficit financed through seigniorage, economies in which the level of deficit is adapted in order to follow a monetary policy with a...

Equilibrium predictions of the noisy rational expectations model are relatively accurate for laboratory asset and information markets. When information about an asset's uncertain dividend is sold to a fixed number of highest bidders, prices, allocations, efficiency, and a distribution of profit...

The study explores the information aggregation properties of experimental markets. A fully-revealing rational expectations equilibrium exists in the competitive model of each of the markets studied. For markets with a single compound security in which traders have identical preferences, the...