Paper #1464

Título:

Cognitive bubbles

Autores:

Ciril Bosch-Rosa, Thomas Meissner y Antoni Bosch-Domènech

Data:

Enero 2015

Resumen:

Smith et al. (1988) reported large bubbles and crashes in experimental asset markets, a result that has been replicated by a large literature. Here we test whether the occurrence of bubbles depends on the experimental subjects' cognitive sophistication. In a two-part experiment, we first run a battery of tests to assess the subjects' cognitive sophistication and classify them into low or high levels of cognitive sophistication. We then invite them separately to two asset market experiments populated only by subjects with either low or high cognitive sophistication. We observe classic bubble- crash patterns in the sessions populated by subjects with low levels of cognitive sophistication. Yet, no bubbles or crashes are observed with our sophisticated subjects. This result lends strong support to the view that the usual bubbles and crashes in experimental asset markets are caused by subjects' confusion and, therefore, raises some doubts about the external validity of this type of experiments.

Palabras clave:

Asset Market Experiment, Bubbles, Cognitive Sophistication.

Códigos JEL:

C91; D12; D84; G11.

Área de investigación:

Economía Experimental y del Comportamiento / Microeconomía

Publicado en:

Experimental Economics, 2017, DOI: 10.1007/s10683-017-9529-0

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