Teams in Asset Markets

There are two treatments. In the first treatment, Individuals, all traders in the market are a single person. In the second treatment, Teams, each trader in the market is a team of two people acting together.

2024-08-21

2025-08-01

We will be calculating five measures of differences in asset bubbles across the two treatments. These five measures are total dispersion (Haruvy and Noussair, 2016), price amplitude (Porter and Smith, 1995), duration (Porter and Smith, 1995), relative absolute deviation and relative deviation (Stockl et al., 2010).

We are also interested in evaluating the chat messages in the Teams treatment. These messages will be coded into different categories based on their content. There are seven categories. Messages may be more than one category.

Total dispersion is the the difference of median price and fundamental value in each round, summed over all rounds. Price amplitude measures the highest and lowest differences of mean price from fundamental value in each round. This differences is then normalized by the first round's fundamental value. Duration measures how long the bubble lasts by counting the number of consecutive rounds in which the difference between mean price and fundamental value is larger than the last round. Simply put, duration is the number of rounds in which the difference of price and fundamental value is growing. Relative absolute deviation is the absolute value difference of the mean price and fundamental value of a round divided by the absolute value of the mean fundamental value. This is summed over all rounds and divided by the number of rounds. Relative deviation is similar to RAD, but it no longer uses absolute price deviations. It allows for prices above and below fundamental value to be captured and balance each other out.

The seven categories of message are (1) calculations of fundamental value (2) other calculations (3) mistakes in calculations (4) a trading rule/strategy (5) forward looking behavior (6) increasing offers and (7) emotions or feelings.

Prior to the experiment, demographic information and a risk elicitation will be collected. We will use the Bomb Risk Elicitation Task (BRET) from Crosetto and Filippin (2013). After this, the experimental market will begin. An experimental market consists of 15 rounds of trading an asset in a continuous double auction. The market currency is Experimental Currency Units (ECU) with an exchange rate of 800 ECU = $1. Before the first round of trading, each trader is randomly endowed with a number of assets in {0,1,2,3,4}, where the total number of assets in each market is 15. In order to ensure there are 15 assets in the market, a distribution of randomly drawn assets is continuously chosen until it sums to 15. This distribution is then distributed to the traders. Assets pay a dividend at the end of each round and each trader has a constant dividend throughout the experiment. Each trader's dividend is randomly drawn from {10,20,30,40} and stays constant throughout all 15 rounds of trading. Finally, traders are endowed with 10,000 ECU at the beginning of the experiment to use to buy assets.

Traders in each market can both buy and sell assets. As long as a trader has at least one asset, they can sell their asset for any price. In order to sell, the trader enters their ask price in a box labeled "Make offer as seller" and presses the button. This ask then shows up in a list of asks from all sellers in the market labeled "Asks". In order to buy an asset, the trader enters their bid price in a box labeled "Make offer as buyer" and presses the button. As long as the buyer has at least as many ECUs as the bid, the amount then shows up in a list of all bids from other buyers in the market labeled "Bids". A sale occurs if there is a buyer's bid at least as high as a seller's ask. The asset is then sold to the buyer for the bid amount. This will be called the transaction price. If there are multiple offers from buyers, the trader with the highest bid buys the asset. If there are multiple prices from sellers, the trader with the lowest ask will sell the asset. Once a transaction occurs, the transaction price at which the asset is traded is plotted on a graph, which every trader can see. The transaction price is also then taken from the buyer and given to the seller. Similarly, the asset is then taken from the seller and given to the buyer.

Each round of trading lasts for two and a half minutes. At the end of each round, the number of assets each trader is holding is multiplied by the dividend and added to their total ECU as their profit for that round. The number of assets and total ECU at the end of each round are the starting amounts for the next round. At the end of the 15 rounds, subject's payoff is determined by the total ECUs they have. This is converted to US dollars and given to the subject with a $5.00 show-up fee.

There are two treatments, Individual and Teams. In the Individual treatment, six traders are in a market and each trader is a single person. This serves as our baseline treatment. In the Teams treatment, the six traders are now teams of two, for a total of 12 people in a session. The teams are randomly paired and fixed in a given session. For each round of trading in Teams, there is an Active Trader and a Passive Trader in the team. The Active Trader participates in the market by actually buying and selling assets. The Passive Trader does not trade in the market, but must approve/deny any trade of the Active Trader. Which of the two teammates are the Active Trader is randomly chosen in the first round of trading and then alternates for each round after. Teams of traders may also chat during the entire experiment. Before each round of trading, teams have 2 minutes to only chat, without any trading. Chat can continue throughout the round of trading as well. Each trader in the team is paid the total earnings of the team at the end of the experiment.

Not available

Randomization will be done in office by a computer.

Randomization is at the individual level.

No

16 markets with 6 traders that are teams of 2 for a total of 192 traders. 12 markets with 6 individual traders for a total of 72 traders. Total there are 264 traders and 28 markets. Each trader may buy or sell assets in 15 periods.

16 markets with 6 traders that are teams of 2 for a total of 192 traders. 12 markets with 6 individual traders for a total of 72 traders. Total there are 264 traders and 28 markets. Each trader may buy or sell assets in 15 periods.

16 markets with 6 traders that are teams of 2 for a total of 192 traders. 12 markets with 6 individual traders for a total of 72 traders. Total there are 264 traders and 28 markets.