It is Not Just Confusion! Strategic Uncertainty in An Experimental Asset Market

Eizo Akiyama, Nobuyuki Hanaki*, Ryuichiro Ishikawa

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

30 Citations (Scopus)

Abstract

To what extent is the observed mispricing in experimental asset markets caused by strategic uncertainty and by confusion? We address this question by comparing subjects’ initial price forecasts in two market environments: one with six human traders and the other with one human and five computer traders. We find that both strategic uncertainty and confusion contribute equally to the median initial forecast deviation from the fundamental value. The effect of strategic uncertainty is greater for subjects with a perfect score in the cognitive reflection test, and it is not significant for those with low scores.

Original languageEnglish
Pages (from-to)F563-F580
JournalEconomic Journal
Volume127
Issue number605
DOIs
Publication statusPublished - 2017 Oct
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics

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