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Full-Text Articles in Economics
Rational Choice: The Contrast Between Economics And Psychology, Vernon L. Smith
Rational Choice: The Contrast Between Economics And Psychology, Vernon L. Smith
Economics Faculty Articles and Research
Rational Choice--the published record of a conference on economics and psychology--frames the issues as a contest between economic theory and the falsifying evidence from psychology. According to a third perspective, that of experimental economics, most standard theory provides a correct first approximation in predicting motivated behavior in laboratory experimental markets, but the theory is incomplete, particularly in articulating convergence processes in time and in ignoring decision cost. This view has roots in the work of Herbert Simon and Sidney Siegel, but it is not plainly represented in contemporary research in economic pyschology.
Off-Floor Trading, Disintegration And The Bid-Ask Spread In Experimental Markets, Joseph Campbell, Shawn Lamaster, Vernon L. Smith, Mark Van Boening
Off-Floor Trading, Disintegration And The Bid-Ask Spread In Experimental Markets, Joseph Campbell, Shawn Lamaster, Vernon L. Smith, Mark Van Boening
Economics Faculty Articles and Research
This article uses experimental methods to establish that greater uncertainty in the environment increases the naturally emerging bid-ask spread in double-auction trading. The opportunity to trade off floor is then introduced. Off-floor trading is greater in the environment with a wider bid-ask spread, increases with block trading, and increases still more with increasing subject experience. Finally, we find that the preponderance of off-floor trades are inside the bid-ask spread, supporting the hypothesis that a motive for such trades is to split privately the gain represented by the bid-ask spread without revealing publicly a willingness to make price concessions.