Asset Pricing and Risk Sharing in Complete Markets: An Experimental Investigation

Bruno Biais, Thomas Mariotti, Sophie Moinas and Sebastien Pouget

No 19420, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study asset pricing and risk sharing in experimental financial markets. We design our experiment to test the key equilibrium implications of rational choice and competitive behavior in complete markets without making parametric assumptions on preferences. We find that participants behave competitively but deviate from rationality, as around 25% of their actions are first-order stochastically dominated. We propose a random-choice model predicting that, as the number of participants grows large, prices and average per-participant trades converge to those in the rational-choice competitive equilibrium. This prediction is supported by our experimental data. We structurally estimate a special case of the random-choice model with CRRA utilities and logit weighting functions and find that only around 80% of participants benefit from participating in the market.

JEL-codes: C92 (search for similar items in EconPapers)
Date: 2024-09
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Related works:
Working Paper: Asset Pricing and Risk Sharing in Complete Markets: An Experimental Investigation (2026)
Working Paper: Asset Pricing and Risk Sharing in Complete Markets: An Experimental Investigation (2025)
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