Equilibrium dominance in experimental financial markets — Experts@Minnesota
We examine the predictive power of equilibrium dominance in experimental markets wherefirms with investment opportunities have an informational advantage over potential investors and are permitted to purchase a money-burning signal. Equilibrium dominance often fails to predict well when a Pareto-superior sequential equilibrium is also available. Instead, equilibrium selection appears to be related to the potential earnings of a more valuable firm that can signal its type successfully by defecting from the sequential equilibrium. Potential investors formulate their bids for firm equity based primarily on expectations formed adaptively in response to signaling choices made by firms.
Cadsby, C. B., Frank, M., & Maksimovic, V. (2009). Equilibrium dominance in experimental financial markets. Journals of Gerontology - Series A Biological Sciences and Medical Sciences, 64(12), 189-232. https://doi.org/10.1093/gerona/glp189
Equilibrium dominance in experimental financial markets. / Cadsby, Charles Bram; Frank, Murray; Maksimovic, Vojislav.
In: Journals of Gerontology - Series A Biological Sciences and Medical Sciences, Vol. 64, No. 12, 2009, p. 189-232.
Cadsby, CB, Frank, M & Maksimovic, V 2009, 'Equilibrium dominance in experimental financial markets', Journals of Gerontology - Series A Biological Sciences and Medical Sciences, vol. 64, no. 12, pp. 189-232. https://doi.org/10.1093/gerona/glp189
Cadsby CB, Frank M, Maksimovic V. Equilibrium dominance in experimental financial markets. Journals of Gerontology - Series A Biological Sciences and Medical Sciences. 2009;64(12):189-232. https://doi.org/10.1093/gerona/glp189
Cadsby, Charles Bram ; Frank, Murray ; Maksimovic, Vojislav. / Equilibrium dominance in experimental financial markets. In: Journals of Gerontology - Series A Biological Sciences and Medical Sciences. 2009 ; Vol. 64, No. 12. pp. 189-232.
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title = "Equilibrium dominance in experimental financial markets",
abstract = "We examine the predictive power of equilibrium dominance in experimental markets wherefirms with investment opportunities have an informational advantage over potential investors and are permitted to purchase a money-burning signal. Equilibrium dominance often fails to predict well when a Pareto-superior sequential equilibrium is also available. Instead, equilibrium selection appears to be related to the potential earnings of a more valuable firm that can signal its type successfully by defecting from the sequential equilibrium. Potential investors formulate their bids for firm equity based primarily on expectations formed adaptively in response to signaling choices made by firms.",
author = "Cadsby, {Charles Bram} and Murray Frank and Vojislav Maksimovic",
T1 - Equilibrium dominance in experimental financial markets
AU - Cadsby, Charles Bram
AU - Frank, Murray
AU - Maksimovic, Vojislav
N2 - We examine the predictive power of equilibrium dominance in experimental markets wherefirms with investment opportunities have an informational advantage over potential investors and are permitted to purchase a money-burning signal. Equilibrium dominance often fails to predict well when a Pareto-superior sequential equilibrium is also available. Instead, equilibrium selection appears to be related to the potential earnings of a more valuable firm that can signal its type successfully by defecting from the sequential equilibrium. Potential investors formulate their bids for firm equity based primarily on expectations formed adaptively in response to signaling choices made by firms.
AB - We examine the predictive power of equilibrium dominance in experimental markets wherefirms with investment opportunities have an informational advantage over potential investors and are permitted to purchase a money-burning signal. Equilibrium dominance often fails to predict well when a Pareto-superior sequential equilibrium is also available. Instead, equilibrium selection appears to be related to the potential earnings of a more valuable firm that can signal its type successfully by defecting from the sequential equilibrium. Potential investors formulate their bids for firm equity based primarily on expectations formed adaptively in response to signaling choices made by firms.