Strategic Uncertainty in an Experimental Asset Market

It is not just confusion ! Strategic uncertainty in an experimental asset market ∗

To what extent is the observed mispricing in experimental asset markets caused by strategic uncertainty and by confusion? We address this question by comparing subjects’ initial price forecasts in two market environments: one with six human traders, and the other with one human and five computer traders. We find that both strategic uncertainty and confusion contribute equally to the median init...

Strategic Bidding in a Pool-Based Electricity Market under Load Forecast Uncertainty

This paper proposes a method for determining the price bidding strategies of market participants consisting of Generation Companies (GENCOs) and Distribution Companies (DISCOs) in a day-ahead electricity market, while taking into consideration the load forecast uncertainty and demand response programs. The proposed algorithm tries to find a Pareto optimal point for a risk neutral participan...

The Effect Of Salvage Market On Strategic Technology Choice And Capacity Investment Decision Of Firm Under Demand Uncertainty

Uncertainty, Information Acquisition and Price Swings in Asset Markets

This paper studies asset markets where Knightian uncertainty about the fundamentals can be mitigated through costly information acquisition. In these markets, investors' information choices can be strategic complements, resulting in multiple equilibria, history-dependent prices, and large price swings occurring after small changes in uncertainty. Our model predicts the typical market response t...

Insider Trading with Stochastic Valuation†

This paper studies a model of strategic trading with asymmetric information of an asset whose value follows a Brownian motion. An insider continuously observes a signal that tracks the evolution of the asset fundamental value. At a random time a public announcement reveals the current value of the asset to all the traders. The equilibrium has two regimes separated by an endogenously determined ...