Positive expectations feedback experiments and number guessing games as models of financial markets

Joep Sonnemans () and Jan Tuinstra

No 10-08, CeNDEF Working Papers from Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance

Abstract: In repeated number guessing games choices typically converge quickly to the Nash equilibrium. In positive expectations feedback experiments, however, convergence to the equilibrium price tends to be very slow, if it occurs at all. Both types of experimental designs have been suggested as modeling essential aspects of financial markets. In order to isolate the source of the differences in outcomes we present several new treatments in this paper. We conclude that the feedback strength (i.e. the ‘p-value’ in standard number guessing games) is essential for the results. Furthermore, positive expectations feedback experiments may provide good representations of highly speculative markets while standard number guessing games model financial markets with more emphasis on dividend yield and value stocks.

Date: 2010
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Citations: View citations in EconPapers (48)

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Related works:
Journal Article: Positive expectations feedback experiments and number guessing games as models of financial markets (2010)
Working Paper: Positive expectations feedback experiments and number guessing games as models of financial markets (2008)
Working Paper: Positive Expectations Feedback Experiments and Number Guessing Games as Models of Financial Markets (2008)
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