Chapter 29 Price Bubbles in Large Financial Asset Markets

This chapter documents some open-book call asset markets that have a very large number of traders relative to traditional laboratory markets. The markets were conducted as out-of-class fully computerized extra-credit exercises in microeconomic theory classes at Indiana University. Students could access the market software at a time of their own choosing and as often as they wanted during each trading round in order to view the market bid and ask arrays, the tentative market price and volume, and edit their personal bid or ask. All traders in a particular market received the same initial endowment of asset shares and cash. A common dividend was declared at the end of each round and all traders in the market had the same rectangular dividend distribution. Performance-based extra-credit points were awarded using a rank-order tournament focusing on the traders' final cash holdings.