Skip to Main content Skip to Navigation
Journal articles

Bubbles and incentives: an experiment on asset markets

Abstract : We explore the effects of competitive incentives and of their time horizon on the evolution of both asset prices and trading activity in experimental asset markets. We compare (i) a no-bonus treatment; (ii) a short-term bonus treatment in which bonuses are assigned to the best performers at the end of each trading period; (iii) a long-term bonus treatment in which bonuses are assigned to the best performers at the end of the 15 periods of the market. We find that the existence of bonus contracts does not increase the likelihood of bubbles but it affects their severity, depending on the time horizon of bonuses. Markets with long-term bonus contracts experience lower price deviations and a lower turnover of assets than markets with either no bonuses or long-term bonus contracts. Short-term bonus contracts increase price deviations but only when markets include a higher share of male traders. At the individual level, the introduction of bonus contracts increases the trading activity of males, probably due to their higher competitiveness.
Document type :
Journal articles
Complete list of metadata

https://halshs.archives-ouvertes.fr/halshs-03033454
Contributor : Nelly Wirth <>
Submitted on : Monday, July 19, 2021 - 3:49:37 PM
Last modification on : Wednesday, July 21, 2021 - 3:13:36 AM

File

RobinStrasnikaVilleval_EPS_202...
Files produced by the author(s)

Identifiers

Citation

Stéphane Robin, Katerina Straznicka, Marie Claire Villeval. Bubbles and incentives: an experiment on asset markets. Economic and Political Studies, 2021, 9 (1), pp. 68-89. ⟨10.1080/20954816.2020.1839158⟩. ⟨halshs-03033454⟩

Share

Metrics

Record views

171

Files downloads

56