Irrationality and beliefs in a laboratory asset market: Is it me or is it you?
Lucy Ackert (),
Brian D. Kluger and
Authors registered in the RePEc Author Service: Qi Li and
Li Qi ()
Journal of Economic Behavior & Organization, 2012, vol. 84, issue 1, 278-291
This paper reports on an experiment designed to examine individual and market outcomes with a mixture of rational and non-rational traders. Using values elicited via auctions, we measure a specific form of irrationality: the tendency to overweight high payoff, low probability events, or probability judgment error. Subjects are classified by their tendency to exhibit errors, as well as their beliefs regarding whether others will make errors. Subjects then participate in a series of double auction markets. The results indicate that both probability judgment error and beliefs about other subjects’ susceptibility to probability judgment error have significant impact on individual and market outcomes.
Keywords: Irrationality; Probability Judgment error; Asset price bubbles (search for similar items in EconPapers)
JEL-codes: C90 G10 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:84:y:2012:i:1:p:278-291
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