Sunspots in the Laboratory

John Duffy and Eric Fisher

American Economic Review, 2005, vol. 95, issue 3, 510-529

Abstract: We show that extrinsic or nonfundamental uncertainty influences markets in a controlled environment. This work provides the first direct evidence of sunspot equilibria. These equilibria require a common understanding of the semantics of the sunspot variable, and they appear to be sensitive to the flow of information. Sunspots always occur in a closed-book call market, but they happen only occasionally in a double auction, where inframarginal bids and offers are observable.

Date: 2005
Note: DOI: 10.1257/0002828054201350
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