Traditional finance is built on the rationality paradigm. This chapter discusses simple models from an alternative approach in which financial markets are viewed as complex evolutionary systems. Agents are boundedly rational and base their investment decisions upon market forecasting heuristics....

We investigate expectation formation in a controlled experimental en-vironment. Subjects are asked to predict the price in a standard asset pricingmodel. They do not have knowledge of the underlying market equilibrium equa-tions, but they know all past realized prices and their own predictions....

Notwithstanding the recognized importance of traders' expectations in characterizing the observed market dynamics, for instance the formation of speculative bubbles and crashes on financial markets, little attention has been devoted so far by economists to a rigorous study of expectation...

We report the results of an experiment designed to study the determinants of asset price movement and consumption smoothing behavior across asset markets populated with varying proportion of traders with and without having induced motive to smooth consumption. Although the asset is over-priced...

We investigate the effect of gender on the price deviation (bubble) from the fundamental value in a learning-to-forecast experiment. Our results show that gender plays a more prominent role in markets with positive expectation feedback than in markets with negative feedback. In both types of...

Models with heterogeneous interacting agents explain macro phenomena through interactions at the micro level. We propose genetic algorithms as a model for individual expectations to explain aggregate market phenomena. The model explains all stylized facts observed in aggregate price fluctuations...

This experiment compares the price dynamics and bubble formation in an asset market with a price adjustment rule in three treatments where subjects (1) submit a price forecast only, (2) choose quantity to buy/sell and (3) perform both tasks. We find deviation of the market price from the...

In this study, we investigate how and why people discriminate among different groups, including their own groups and multiple out-groups. In a laboratory experiment, we use dictator games for five groups to compare actual transfers to in-group and out-group agents with the respective beliefs...

We explain contributions in public goods games with the help of the reciprocity model of Dufwenberg and Kirchsteiger (2004) by applying some plausible modifications: Most importantly, we assume that subjects overestimate the kindness of their group members. In combination with the finding that...

This experiment compares the price dynamics and bubble formation in an asset market with a price adjustment rule in three treatments where subjects (1) submit a price forecast only, (2) choose quantity to buy/sell and (3) perform both tasks. We find deviation of the market price from the...