Reaction to uncertainty and market mechanism : experimental evidence


Di Mauro, Carmela ; Maffioletti, Anna


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URL: https://ub-madoc.bib.uni-mannheim.de/2800
URN: urn:nbn:de:bsz:180-madoc-28001
Document Type: Working paper
Year of publication: 2001
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject: 330 Economics
Classification: JEL: D81 ,
Subject headings (SWD): Großbritannien , Anlageverhalten , Erwarteter Nutzen , Marktmechanismus , Auktionstheorie , Entscheidung bei Unsicherheit
Keywords (English): risk , uncertainty , market , auctions , violation
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.
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Di Mauro, Carmela ; Maffioletti, Anna (2001) Reaction to uncertainty and market mechanism : experimental evidence. Open Access [Working paper]
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