Sean M. Collins

Holdout: Existence, Information, and Contingent Contracting

The holdout problem permeates policy discussions of legal issues involving bargaining for land acquisition and more broadly impacts multilateral bargaining between agents. Laboratory experiments investigate the scope of the holdout problem. The research strategy incorporates as treatment variables available information and the exposure problem arising from the unavailability of contingent contracts. An examination reveals that holdout can reliably produce large inefficiencies and lost opportunities for mutually advantageous trade. The introduction of contingent contracts facilitates successful bargaining. However, buyers are not made significantly better off by contingent contracts.

Response mode and stochastic choice together explain preference reversals

Informed by Grether and Plott (1979) and Cox and Grether (1996), we implement various preference elicitation procedures over a parameter grid. First, we find a lower incidence of preference reversals for probability equivalents from the dual‐to‐selling version of Becker, Degroot, and Marschak (1964; BDM) than for certainty equivalents from traditional BDM—consistent with conjectures regarding response mode. Second, the Blavatskyy (2009, 2012) model of probabilistic choice can explain the incidence of preference reversals when using probability equivalents. Thus, between response mode (outside the Blavatskyy model) and stochastic choice (as per Blavatskyy), preference reversals in the original certainty equivalent case seem to be explained. We also present estimates for risk and stochasticity parameters; the former are not correlated across mechanisms, but the latter are. Finally, relatively more error‐laden behavior (based on within‐mechanism checks) can be associated with fewer reversals across mechanisms. The data make clear, empirically, the logical proposition that reducing reversals requires only a better “match” with binary choice, not necessarily rational behavior at any deeper level.

Price-Setting and Attainment of Equilibrium: Posted Offers Versus an Administered Price

The operation of the posted offer market with advance production environment, appropriately parameterized, differs from that of the market entry game, appropriately presented, only in terms of price-setting. We establish the effect of this difference in price-setting on attainment of the competitive equilibrium allocation while controlling for effects relating to the presentation of the market entry game and to the stationarity or non-stationarity of environment. Free posting of prices promotes convergence to the competitive equilibrium allocation, while the typical market entry game data can be characterized as displaying cycling prices.

Fundamentals, momentum, and bubbles in experimental asset markets

Purpose - – The purpose of this paper is to report the results of a study concerning how fundamental-motivated investors, and their subsequent impact on the path of prices, affect the severity of price bubbles in an experimental laboratory asset market. Design/methodology/approach - – In a laboratory experiment, asset markets are manipulated by systematically replacing inexperienced human traders with automated traders programmed to submit bids and asks at fundamental value. Findings - – When traders in a market are automated to invest on fundamentals, deviations from fundamental value are initially suppressed, but reappear when automated traders cease to influence prices. A significant reduction in the severity of the resulting bubble may be attributed to the interaction of automated traders and humans through the initial path of prices when controlling for changes in liquidity. This reduction corresponds to reduced autocorrelation in the time series of returns. Originality/value - – This paper represents the first attempt (to the authors’ knowledge) to extend the intervention approach of the seminal paper by Smith

Experiments in financial economics

Research in Experimental Economics focuses on laboratory experimental economics, but welcomes work from authors of theoretical, empirical, or field economic research if it would be of interest to the broader experimental economics community. The goal of Research in Experimental Economics is to be complementary with, and not in competition with, traditional journals as outlets for experimental work. Research in Experimental Economics has the freedom to consider papers that may not be appropriate for traditional journals for a variety of reasons. Some examples of these strengths include: theme volumes, replication studies, research which requires longer manuscripts for presentation of data or analysis, and papers on methodological topics. The volumes of Research in Experimental Economics are not tied to specific, recurring conferences. Typically, a volume theme is established with scholars who are willing to serve as volume-specific editors. The only constraint the senior editor places on the volume editors is that the papers should undergo a formal referee process using the same quality standards as traditional journals. Recent topics have included market power, charitable contributions, and field experiments.