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)...

The arrival of new, unfamiliar, investment opportunities is often associated with "exuberant" movements in asset prices and real economic activity. During these episodes of high uncertainty, financial markets look at the real sector for signals about the profitability of the new investment...

This note uses techniques developed for aggregate games to characterize the set of equilib- ria for a beauty contest or prediction game in which the experts’ preferences are quadratic, but with an otherwise unrestricted information structure for private signals and the state variable. We show...

This chapter studies how incomplete information helps accommodate frictions in coordination, leading to novel insights on the joint determination of expectations and macroeconomic outcomes. We review and synthesize recent work on global games, beauty contests, and their applications. We...

Wir nutzen die Ergebnisse eines Experiments über Lemons-Märkte, um wirtschaftspolitische Folgerungen über die EU-Verbraucherschutzregulierung von 1999 abzuleiten. Die beiden Marktdesigns, die im Experiment getestet wurden, unterscheiden sich hinsichtlich des Grades, zu dem die Verbraucher das...

In this paper we experimentally test a theory of boundedly rational behavior in a "lemons market." We analyzed two different market designs, for which perfect rationality implies complete and partial market collapse, respectively. Our empirical observations deviate substantially from these...