Abstracts

Peer-reviewed publications:

Arifovic, J., C. Hommes, A. Kopányi-Peuker, I. Salle (2023): Ten Isn't Large! Group Size and Coordination in a Large-Scale Experiment. AEJ: Microeconomics, Vol. 15(1), pp. 580-617. - link working paper replication package

We provide experimental evidence on coordination within large groups that could proxy the atomistic nature of real-world markets. We use a bank-run game where the two pure-strategy equilibria can be ranked by payoff and risk-dominance and a sequence of public announcements introduces stochastic sunspot equilibria. We find systematic group-size effects that theory fails to predict. When the payoff-dominant strategy is risky enough, the behavior of small groups is uninformative of the behavior in large groups: unlike 'smaller' groups of size 10, larger groups exclusively coordinate on the Pareto inferior strategy and never coordinate on sunspots.

Hanaki, N., C. Hommes, D. Kopányi, A. Kopányi-Peuker, J. Tuinstra (2023): Forecasting returns instead of prices exacerbates financial bubbles. Experimental Economics, online. - link (open access) replication package

Expectations of future returns are pivotal for investors’ trading decisions, and are therefore an important determinant of the evolution of actual returns. Evidence from individual choice experiments with exogenously given time series of returns suggests that subjects’ return forecasts are substantially affected by how they are elicited and by the format in which subjects receive information about past asset performance. In order to understand the impact of these effects found at the individual level on market dynamics, we consider a learning to forecast experiment where prices and returns are endogenously determined and depend directly upon subjects’ forecasts. We vary both the variable (prices or returns) subjects observe and the variable (prices or returns) they have to forecast, with the same underlying data generating process for each treatment. Although there is no significant effect of the presentation format of past information, we do find that markets are significantly more unstable when subjects have to forecast returns instead of prices. Our results therefore show that the elicitation format may exacerbate, or even create, bubbles and crashes in financial markets.

Fišar, M., B. Greiner, C. Huber, E. Katok, A. Ozkes, and the Management Science Reproducibility Collaboration (forthcoming). Reproducibility in Management Science. Management Science. - Member of the Management Science Reproducibility Collaboration, click here for the paper

With the help of more than 700 reviewers we assess the reproducibility of nearly 500 articles published in the journal Management Science before and after the introduction of a new Data and Code Disclosure policy in 2019. When considering only articles for which data accessibility and hard- and software requirements were not an obstacle for reviewers, the results of more than 95% of articles under the new disclosure policy could be fully or largely computationally reproduced. However, for 29% of articles at least part of the dataset was not accessible to the reviewer. Considering all articles in our sample reduces the share of reproduced articles to 68%. These figures represent a significant increase compared to the period before the introduction of the disclosure policy, where only 12% of articles voluntarily provided replication materials, out of which 55% could be (largely) reproduced. Substantial heterogeneity in reproducibility rates across different fields is mainly driven by differences in dataset accessibility. Other reasons for unsuccessful reproduction attempts include missing code, unresolvable code errors, weak or missing documentation, but also soft- and hardware requirements and code complexity.  Our findings highlight the importance of journal code and data disclosure policies, and suggest potential avenues for enhancing their effectiveness

Kopányi-Peuker, A., M. Weber (2021): Experience Does not Eliminate Bubbles: Experimental Evidence. Review of Financial Studies,  Vol. 34.(9), pp. 4450-4485. - link

We study the role of experience in the formation of asset price bubbles. Therefore, we conduct a call market experiment in which participants trade assets with each other and a learning-to-forecast experiment in which participants only forecast future prices (while trade based on these forecasts is computerized). Each experiment comprises three treatments varying the information that participants receive about the fundamental value. Each market is repeated three times. Throughout, we observe sizable bubbles that do not disappear with experience. Our findings in the call market experiment stand in contrast to the literature. Our findings in the learning-to-forecast experiment are novel.

Hommes, C., A. Kopányi-Peuker, J. Sonnemans (2021): Bubbles, crashes and information contagion in large-group asset market experiments. Experimental Economics, Vol. 24., pp. 414-433. - click here for the paper

We study the emergence of bubbles in a laboratory experiment with large groups of individuals. The realized price is the aggregation of the forecasts of a group of individuals, with positive expectations feedback through speculative demand. When prices deviate from fundamental value, a random selection of participants receives news about overvaluation. Our findings are: (i) large asset bubbles are robust in large groups, (ii) information contagion through news affects behaviour and may break the coordination on a bubble, (iii) time varying heterogeneity provides an explanation of bubble formation and crashes, and (iv) bubbles are strongly amplified by coordination on trend-extrapolation.

Kopányi-Peuker, A. (2019): Yes, I'll do it: a large-scale experiment on the volunteer's dilemma. Journal of Behavioral and Experimental Economics, Vol. 80., pp. 211-218. - click here for the paper

In many real-life situations people face a simple decision whether to volunteer or not to provide some benefit for themselves and also for others. This research investigates the effects of the group size and the magnitude of the volunteering cost in a controlled large-scale laboratory experiment, where subjects play the volunteer’s dilemma only once. The experiment varies group sizes ranging from groups of 3 to about 100, and 2 different cost/benefit ratios. Results show that high cost reduces volunteering probability only in the smallest groups, but not for other group sizes. Furthermore, non-monotonic group size effect is found on the individual volunteering decisions. These findings are not in line with the mixed-strategy Nash equilibrium prediction. Subjects volunteer more often in most treatments than the Nash prediction which benefits them on average compared to the Nash prediction.

Kopányi-Peuker, A., T. Offerman, R. Sloof (2018): Team production benefits from a permanent fear of exclusion. European Economic Review, Vol. 103., pp. 125-149. - click here for the paper

One acclaimed role of managers is to monitor workers in team production processes and discipline them through the threat of terminating them from the team. We extend a standard weakest link experiment with a manager who can decide to replace some workers at a cost. We address two main questions: (i) Does the fear of exclusion need to be a permanent element of contractual agreements? (ii) Are the results robust to the introduction of noise in workers’ productivity? We find that the fear of exclusion strongly encourages co-operation among workers, but it does not generate the trust needed for cooperation once the fear of exclusion is lifted. That is, once some workers receive a permanent contract, effort levels steadily decrease. The results are robust to the introduction of noise in the link between effort and productivity.

Kopányi-Peuker, A., T. Offerman, R. Sloof (2017): Fostering cooperation through the enhancement of own vulnerability. Games and Economic Behavior, Vol.101., pp. 273-290. - click here for the paper

We consider the possibility that cooperation in a prisoner’s dilemma is fostered by people’s voluntary enhancement of their own vulnerability. The vulnerability of a player determines the effectiveness of possible punishment by the other. In the “Gradual” mechanism, players may condition their incremental enhancements of their vulnerability on the other’s choices. In the “Leap” mechanism, they unconditionally choose their vulnerability. In our experiment, subjects only learn to cooperate when either one of these mechanisms is allowed. In agreement with theory, subjects aiming for cooperation choose higher vulnerability levels in Gradual than in Leap, which maps into higher mutual cooperation levels.

Working papers:

"Bank choice, bank runs, and coordination in the presence of two banks" (with Jasmina Arifovic and Johan de Jong) - click here for the paper

We investigate learning in a repeated bank choice game, where agents first choose a bank to deposit in and then decide to withdraw that deposit or not. This game has a single Nash equilibrium in pure strategies, characterized by all agents depositing in the bank that offers the highest return, even though it may be more vulnerable to bankruptcy if some agents withdraw early. We use an individual evolutionary learning algorithm to model under which circumstances and with which beliefs agents can learn the Nash equilibrium in the repeated game and compare the results to an  experiment. We find subjects coordinating on the Nash equilibrium under low and  medium risk, but efficient coordination fails under high risk (irrespective of whether subjects have full or only partial information).

"The Role of the End Time in Experimental Asset Markets" (with Matthias Weber) - click here for the paper

By now there are hundreds of scientific articles on experimental asset markets. Almost all of these experiments use a short and definite horizon. This may be one of the starkest differences to financial asset markets outside the laboratory, which usually have indefinite and comparatively long horizons. We analyze the role of the end time in an asset market experiment in which we vary the length of the horizon and whether the end time is definite or indefinite. We find recurring bubbles and similar price dynamics in all treatments (with moderately lower prices in the treatments with a long horizon). 

"Endogenous information disclosure in experimental oligopolies" (with Dávid Kopányi) - click here for the paper

With this research we examine whether observing firm-specific production levels leads to a less competitive market outcome. We consider an endogenous information setting where firms can freely decide whether they want to share information about their past production levels. By voluntarily sharing information, firms can show their willingness to cooperate. We conduct a laboratory experiment where firms decide only about their production levels first, and the information they receive is exogenous (either no information, or aggregate / disaggregated information about others' production, in varying order). Later, firms can also decide whether to share their past production levels with others. We vary the kind of information firms receive: they receive the shared information either in aggregate or in disaggregated form. Our results show no difference in average total outputs across data aggregation and information settings. However, we observe more collusion when individual information was shared voluntarily. Our results show that subjects use voluntary sharing to show their intentions to cooperate. If they share information, they produce significantly less than if they do not share information.

" "I" on You: Identity in the Dictator Game" (with Jin Di Zheng) - click here for the paper

We study a giver’s generosity depending on her relationship with the recipient and the observer. We assign different group identities to the players using a variation of the minimumgroup paradigm, and test the effect of group memberships on altruistic giving in the dictator game with a passive observer. The results show that the dictator gives the least when she is from a different group than the other two. We further show that dictators give more when there is no observer. This is driven by male subjects who react more to the presence of the observer.