Abstract
| Original language | English |
|---|---|
| Pages (from-to) | 441-476 |
| Number of pages | 36 |
| Journal | Experimental Economics |
| Volume | 22 |
| Issue number | 2 |
| Early online date | 3 Feb 2018 |
| DOIs | |
| Publication status | Published - 15 Jun 2019 |
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The aggregate impacts of tournament incentives in experimental asset markets. / Henker, Julia; Paul, Debapriya; Owen, Sian.
In: Experimental Economics, Vol. 22, No. 2, 15.06.2019, p. 441-476.Research output: Contribution to journal › Article › Research › peer-review
TY - JOUR
T1 - The aggregate impacts of tournament incentives in experimental asset markets
AU - Henker, Julia
AU - Paul, Debapriya
AU - Owen, Sian
PY - 2019/6/15
Y1 - 2019/6/15
N2 - We examine how rewards and penalties under tournament incentives impact price behaviour in experimental asset markets. Adding a penalty to a reward-only contract, or a reward to a penalty-only contract, changes the traders’ behaviour. The experimental markets with adjusted contracts experience less trading, but longer-lived and larger bubbles. This observed effect of penalties is consistent with herd-driven behaviour under relative performance evaluation, while the effect of rewards reflects the influence of the convexity of bonuses. However, these effects dissipate with trader experience. Our findings contribute to the debate attributing market instability to incentive structures in the finance industry.
AB - We examine how rewards and penalties under tournament incentives impact price behaviour in experimental asset markets. Adding a penalty to a reward-only contract, or a reward to a penalty-only contract, changes the traders’ behaviour. The experimental markets with adjusted contracts experience less trading, but longer-lived and larger bubbles. This observed effect of penalties is consistent with herd-driven behaviour under relative performance evaluation, while the effect of rewards reflects the influence of the convexity of bonuses. However, these effects dissipate with trader experience. Our findings contribute to the debate attributing market instability to incentive structures in the finance industry.
UR - http://www.scopus.com/inward/record.url?scp=85045076867&partnerID=8YFLogxK
U2 - 10.1007/s10683-018-9562-7
DO - 10.1007/s10683-018-9562-7
M3 - Article
VL - 22
SP - 441
EP - 476
JO - Experimental Economics
JF - Experimental Economics
SN - 1386-4157
IS - 2
ER -