Will Case-Based Decision Makers Survive in a Financial Market?
نویسنده
چکیده
I analyze whether case-based decision makers (CBDM) can survive in an asset market in the presence of expected utility maximizers. Conditions are identified, in which the CBDM retain a positive mass with probability one. CBDM can cause predictability of asset returns, high volatility and bubbles. It is found that the expected utility maximizers can disappear from the market for a finite period of time, if the mispricing of the risky asset caused by the case-based decision makers aggravates too much. Only in the case of logarithmic expected utility maximizers do the case-based decision makers disappear from the market for all parameter values.
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