“Judgemental Overconfidence, Self-Monitoring, and Trading Performance in an Experimental Financial Market.”

This week, we add an asymmetric information trading game, derived from Biais, Hilton, Mazurier, Pouget (RES 2004) and Plott & Sunder (Econometrica 88).

The paper is available on the site of the journal, and the game is in the “finance section” on our site.

 

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Abstract of the paper:

We measure the degree of overconfidence in judgement (in the form of miscalibration, i.e. the tendency to overestimate the precision of one’s information) and self-monitoring (a form of attentiveness to social cues) of 245 participants and also observe their behaviour in an experimental financial market under asymmetric information. Miscalibrated traders, underestimating the conditional uncertainty about the asset value, are expected to be especially vulnerable to the winner’s curse. High self-monitors are expected to behave strategically and achieve superior results. Our empirical results show that miscalibration reduces and self-monitoring enhances trading performance. The effect of the psychological variables is strong for men but non-existent for women.”

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“Teaching Collective Action Problems without Contextual Bias: The Red/Green Simulation”

This week we are adding the Red/Green Simulation, by James R. Bruehler, Alan P. Grant, and Linda S. Ghent (Journal of Economics and Finance Education 2017).

The paper is available on the site of the (open access) journal, and the game is in the “externalities and public goods section” on our site.

 

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Abstract of the paper:

“Collective action problems are at the heart of many economic issues. Often, students have trouble comprehending how society ends up with a less than optimal outcome, and may incorrectly assume that someone must want the outcome that occurs. Correcting this error is made difficult by the biases that students bring to these issues.
The Red/Green simulation demonstrates the tension between self-interest and the social good in a context-free manner allowing students to see that these sub-optimal outcomes may not be desired by anyone, but instead can result from unhealthy systems of incentives.”

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“The Carbon Trading Game”

This week, we are adding “The Carbon Trading Game” by Roger Fouquet (Climate Policy 2003), on our site, in the “Externalities and public goods” section.

 

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Abstract of the paper:

“In response to the Kyoto Protocol, an international market for carbon dioxide tradable permits is likely to be created. Two of the key issues involved are explaining the concepts of tradable permits to industrialists, policy-makers and the man on the street, and anticipating how the market will evolve. A simple game of the market for carbon dioxide tradable permits has been developed and used that can help deal with both issues. As a pedagogical tool, this game benefits from simplicity (just a few pieces of paper are needed) and enables students to grasp the concepts and remember them through the intensity and fun of a trading ‘pit’. The experiences also provide substantial insights into the evolution of the carbon dioxide permit market, particularly related to the evolution of trade volume, permit prices and country strategies.”
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Mooc “Manage Your Prices: an Introduction to Pricing Strategy and Revenue Management”

A MOOC about Pricing and Revenue Management, by Christophe Bontemps, Nathalie Lenoir and ENAC, and involving some of our simulations, starts today on FutureLearn:

 

 

How do airlines, hotels, resorts and other organisations manage their prices? Why are these prices apparently unrelated to costs and different for each consumer? And what are the underlying reasons and processes behind these prices?

Open the black box of pricing strategy and revenue management

 

https://www.futurelearn.com/courses/pricing-strategy-revenue-management

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“Patents and R&D: A Classroom Experiment”

This week, we are adding “Patents and R&D: A Classroom Experiment” by Amy McCormick Diduch ( International Review of Economics Education 2010), on our site, in the industrial organization section.

 

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Abstract of the paper:

“Public policy towards patents has assumed a robust positive relationship between the strength of patent protection and the level of innovative research effort even though economic theory and empirical evidence suggest that the impact of patents on research varies considerably by industry.This classroom experiment provides students with an introduction to two competing models of the impact of patents on R&D: the ‘winner-take-all’ model contains incentives for excessive research effort and the ‘knowledge spillover’ model contains incentives for free riding. Class discussion explores potential changes to current patent policy and policy alternatives for stimulating R&D.”
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