Speculation rather than enterprise? Keynes’ beauty contest revisited in theory and experiment

Kene Boun My (), Camille Cornand and Rodolphe Dos Santos Ferreira

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: In Keynes’ beauty contest, agents make evaluations reflecting both an expected fundamental value and the conventional value expected to be set by the market. They thus respond to fundamental and coordination motives, respectively, the prevalence of either being set exogenously. Our contribution is twofold. First, we propose a valuation game in which agents strategically choose how to weight each motive. This game emphasises how public information leads agents to favour the coordination motive. Second, we test the game through a laboratory experiment. Subjects tend to conform to theoretical predictions, except when fundamental uncertainty is low relative to strategic uncertainty.

Keywords: dispersed information; public information; beauty contest; coordination; experiment. (search for similar items in EconPapers)
JEL-codes: C92 D84 E12 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-exp, nep-gth and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Speculation Rather than Enterprise ? Keyness Beauty Contest Revisited in Theory and Experiment (2017)
Working Paper: Speculation rather than enterprise? Keynes' beauty contest revisited in theory and experiment (2017)
Working Paper: Speculation rather than enterprise? Keynes' beauty contest revisited in theory and experiment (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2017-13

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