Abstract
We construct asset markets of the type studied in Smith et al. (1988) in which price bubbles and crashes are widely observed. In addition to a spot market, there are futures markets in operation, one maturing at the beginning of each period of the life of the asset. We find that when futures markets are present, bubbles do not occur in the spot markets. The futures markets seem to reduce the speculation and the decision errors that appear to give rise to price bubbles in experimental asset markets.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 167-184 |
| Number of pages | 18 |
| Journal | Pacific Economic Review |
| Volume | 11 |
| Issue number | 2 |
| DOIs | |
| State | Published - Jun 2006 |
| Externally published | Yes |
ASJC Scopus subject areas
- Economics and Econometrics