Reaction to uncertainty and market mechanism: experimental evidence

Carmela Di Mauro () and Anna Maffioletti

No 01-41, Papers from Sonderforschungsbreich 504

Abstract: Much of the evidence supporting the Ellsberg's paradox comes from experiments on individual choice and judgement. In this study, we address the issue whether, in market experiments, there is a tendency for anomalous behaviour to disappear or to be reduced as a consequence of market experience and feedback. We empirically test the validity of this assumption by running an auction market for the sale of both risky and uncertain prospects. We compare bidding behaviour and prices in market-like settings with valuations obtained from individual pricing tasks. We conclude that, with the repetition of the market experience, there is a tendency for subjective expected utility to perform better. However, economists' general assumption that, in laboratory experiments, poor performance of SEU is due to the lack of financial incentives or to the lack of market-like settings is by no means supported by our data.

Keywords: risk; uncertainty; market; auctions; violation (search for similar items in EconPapers)
JEL-codes: D81 (search for similar items in EconPapers)
Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://madoc.bib.uni-mannheim.de/2800/1/dp01_41.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mnh:spaper:2800

Access Statistics for this paper

More papers in Papers from Sonderforschungsbreich 504 Contact information at EDIRC.
Bibliographic data for series maintained by Katharina Rautenberg ().