Asset Price Bubbles and Crashes with Near-Zero-Intelligence Traders: Towards an Understanding of Laboratory Findings
John Duffy () and
Utku Unver ()
Computational Economics from University Library of Munich, Germany
We examine whether a simple agent--based model can generate asset price bubbles and crashes of the type observed in a series of laboratory asset market experiments beginning with the work of Smith, Suchanek and Williams (1988). We follow the methodology of Gode and Sunder (1993, 1997) and examine the outcomes that obtain when populations of zero-- intelligence (ZI) budget constrained, artificial agents are placed in the various laboratory market environments that have given rise to price bubbles. We have to put more structure on the behavior of the ZI-agents in order to address features of the laboratory asset bubble environment. We show that our model of "near--zero--intelligence" traders, operating in the same double auction environments used in several different laboratory studies, generates asset price bubbles and crashes comparable to those observed in laboratory experiments and can also match other, more subtle features of the experimental data.
JEL-codes: D83 D84 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-cmp and nep-exp
Date: 2003-07-01, Revised 2004-03-17
Note: Type of Document -
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpco:0307001
Access Statistics for this paper
More papers in Computational Economics from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ().