Bubbles and Experience: An Experiment with a Steady Inflow of New Traders

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Bubbles and Experience: An Experiment with a Steady Inflow of New Traders

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Bubbles and Experience: An Experiment

History contains many colorful examples where speculative trade in some commodity or financial asset generated a phase of rapidly increasing prices, followed by a sudden collapse (see, e.g., Edward Chancellor, 1999, or Charles Kindleberger, 2001). One famous case cited by many economists (see Peter Garber, 2000, pp. 127–31, for references) is the Dutch “tulipmania” of the 1630s. The prices of c...

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We investigate experimentally how the share of experienced traders in doubleauction asset markets affects trading, in particular the occurrence of bubble-crash pricing patterns. In each session, six subjects trade in three successive market rounds and gain experience. In a fourth round, depending on the treatment, two or four experienced subjects are replaced by inexperienced subjects. The resu...

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ژورنال

عنوان ژورنال: SSRN Electronic Journal

سال: 2012

ISSN: 1556-5068

DOI: 10.2139/ssrn.1999041