Two Heads Are Less Bubbly than One: Team Decision-Making in an Experimental Asset Market

Stephen Cheung and Stefan Palan ()

No 4507, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We study the effect of team decision-making on bubbles and crashes in experimental asset markets of the kind introduced by Smith, Suchanek and Williams (1988). We find that populating such markets with teams of size two instead of individuals significantly reduces the severity of mispricing. In particular we observe that under our teams treatment, deviations in prices away from intrinsic value are significantly smaller in magnitude, shorter in duration and associated with lower volume and price volatility. We also find an unexpected gender effect in team composition, manifesting itself in more extreme – though not consistently more profitable – behaviour by all-male teams. Since these effects are not observed among male participants generally, we conjecture that they may be due to factors specific to the psychology of decision-making in male-dominated environments.

Keywords: gender composition of teams; asset market experiments; group decision-making; price bubbles (search for similar items in EconPapers)
JEL-codes: C92 D70 G12 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2009-10
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published - revised version published in Experimental Economics, 2012, 15 (3), 373-397

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Related works:
Journal Article: Two heads are less bubbly than one: team decision-making in an experimental asset market (2012)
Working Paper: Two heads are less bubbly than one: Team decision-making in an experimental asset market (2011)
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