A classical model of speculative asset price dynamics

In retrospect, the experimental findings on competitive market behavior called for a revival of old, classical, view competition as collective higgling and bargaining process (as opposed to price-taking behaviors) founded reservation prices (in place utility function). this paper, we specialize classical methodology deal with speculation, an important impediment price stability. The model involves typical features field or lab asset setup lends itself test its specific predictions; here use explain three general stylized facts, well established both empirically experimentally: excess, fat-tailed, clustered volatility speculative prices. fat tails emerge in from amplifying nature leading random-coefficient autoregressive return (and power-law tails); clustering is due traders’ long memory news; bubbles are persistent phenomenon model, and, assuming standard present value pattern, bubble size increases proportion speculators decreases trading horizon.