This Thursday, we are adding a new classroom game about speculative bubbles, by Sophie Moinas and Sébastien Pouget on http://economics-games.com/games, in the finance section.

 

 

A single player simulation is also available (robots’ behavior is based on decisions observed in the original scientific experiment)

 

Abstract of the paper:

“Students sequentially trade an asset which is publicly known to have a fundamental value of zero. If there is no cap on asset prices, speculative bubbles can arise at the Nash equilibrium because no trader is ever sure to be last in the market sequence. Otherwise, the Nash equilibrium involves no trade. Bubbles usually occur with or without a cap on prices. Traders who are less likely to be last and have less steps of reasoning to perform to reach equilibrium are in general more likely to speculate.”

(SEJ 2016: http://onlinelibrary.wiley.com/doi/10.1002/soej.12119/abstract)

Next Thursday, we will add a simulation introducing the perfect competition model.

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