Learning from Unrealized versus Realized Prices
-
M. Kathleen Ngangoué
-
Georg Weizsäcker
- American Economic Journal: Microeconomics (Forthcoming)
Abstract
Our experiments investigate the extent to which traders learn from
the price, differentiating between situations where orders are submitted before versus after the price has realized. In simultaneous
markets with bids that are conditional on the price, traders neglect
the information conveyed by the hypothetical value of the price.
In sequential markets where the price is known prior to the bid
submission, traders react to price to an extent that is roughly consistent with the benchmark theory. The difference's robustness to
a number of variations provides insights about the drivers of this
effect.
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