Asset Pricing and Risk Sharing in Complete Markets: An Experimental Investigation1

Bruno Biais, Sophie Moinas, Sebastien Pouget and Thomas Mariotti ()
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Bruno Biais: HEC Paris - Ecole des Hautes Etudes Commerciales
Sophie Moinas: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Sebastien Pouget: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Thomas Mariotti: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: We study asset pricing and risk sharing in experimental financial markets designed to test rational choice and competitive behavior in complete markets. We find that participants behave competitively but deviate from rationality: approximately 25% of their actions are first-order stochastically dominated. To interpret these experimental findings, we propose a random-choice model predicting that market-clearing prices and average trades should converge to those in the rational-choice competitive equilibrium as market size grows. Our experimental data support this convergence prediction. A structural estimation under CRRA utilities and logit choice probabilities reveals that approximately 20% of participants would have obtained higher expected utility in autarky, suggesting that bounded rationality can make market participation welfarereducing for a significant minority.

Keywords: Random-Choice Model; Experimental Financial Markets; Risk Sharing; Asset Pricing (search for similar items in EconPapers)
Date: 2026-05-04
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-05610601

DOI: 10.2139/ssrn.6388957

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