Econometrica: Jul 2013, Volume 81, Issue 4

The Bubble Game: An Experimental Study of Speculation

https://doi.org/10.3982/ECTA9433
p. 1507-1539

Sophie Moinas, Sebastien Pouget

We propose a bubble game that involves sequential trading of an asset commonly known to be valueless. Because no trader is ever sure to be last in the market sequence, the game allows for a bubble at the Nash equilibrium when there is no cap on the maximum price. We run experiments both with and without a price cap. Structural estimation of behavioral game theory models suggests that quantal responses and analogy‐based expectations are important drivers of speculation.

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Supplement to "The Bubble Game: An Experimental Study of Speculation"

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