A policy maker (PM) needs information that only financial market traders know in order to implement his optimal policy, and traders may aggregate this information in asset prices. In such a setting, prices can become uninformative, because the PM reacts to information contained in prices,...

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...

This paper formalizes the idea that more hedging instruments may destabilize markets when traders are heterogeneous and adapt their behavior according to experience based reinforcement learning. We investigate three different economic settings, a simple mean-variance asset pricing model, a...

Using individual data from the Eurosystem’s liquidity providing tenders for the pre-crisis period we investigate banks’ joint bidding behaviour in Main Refinancing Operation (MRO) and Longer Term Refinancing Operations (LTRO). We test whether banks bid at lower rates in MROs before the LTRO...

We study the emergence of bubbles in a laboratory experiment with large groups of individuals. The realized price is the aggregation of the forecasts of a group of individuals, with positive expectations feedback through speculative demand. When prices deviate from fundamental value, a random...

One explanation for overpricing on asset markets is a lack of traders\' self-control. Self-control is the individual capacity to override or inhibit undesired impulses that may drive prices. We implement the first experiment to address the causal relationship between self-control abilities and...

One possible determinant of overpricing on asset markets is a lack of self-control abilities of traders. Self-control is the individual capacity to override or inhibit undesired behavioral tendencies such as impulses and to refrain from acting on them. We implement the first experiment that is...

We generalize the "No-speculative-trade" theorem for finite unawareness belief structures in Heifetz, Meier, and Schipper (2013) to the infinite case.

We prove a no-speculative-trade theorem under unawareness for the infinite case. This generalizes the result for the finite case by Heifetz, Meier, and Schipper (2013).

One possible determinant of overpricing on asset markets is a lack of self-control abilities of traders. Self-control is the individual capacity to override or inhibit undesired behavioral tendencies such as impulses and to refrain from acting on them. We implement the first experiment that is...