Articles published in referred journals
The impact of a pre-opening session on subsequent trading: en experimental analysis (with Rocco Caferra and Andrea Morone). Economic Notes (2024)
We investigate whether a pre-opening call-market session affects the subsequent continuous-double-auction trading phase, resulting. The underlying idea is that the introductory call-market of the combined market structure might mitigate price volatility during the continuous-double-auction, since agents' private information are revealed through the pre-opening price. We check the robustness of our results testing for different levels of precision and distribution of information. Results evidence a positive correlation between pre-opening price and subsequent prices traded and a lower price deviation from its fundamental value in case of high quality information. All these aspects suggest that a clear pre-opening phase might improve market-efficiency.
"Less is more" or "more is better" ? The effect of asymmetric information distribution on market efficiency and wealth inequality (with Rocco Caferra and Andrea Morone). Journal of Economic Interaction and Coordination (2023)
We provide experimental and empirical evidence on the role of information distribution and accuracy in solving market inefficiency and the related welfare implications. To this end, we vary both (i) the informativeness of the private signal released and (ii) the fraction of informed traders. At market level, results evidence how higher informativeness is not conclusive, since mispricing persists. Furthermore, a reduction of signal precision reflects traders’ uncertainty aversion through lower price volatility. Results are robust when both all and half of the players are informed (i.e., received the signals). At subject level, we observe that informed traders are gaining more profits. Anyway, the signal precision and distribution do not statistically change the profits of both net market-winners and net market-losers. This suggests that—on average—the intensity of asymmetric information distribution (i.e., the size of the information imbalance between informed and uniformed traders) does not alter the wealth distribution.
Decision process and preferences over risk under the "endogenous decision rule": results from a group experiment (with Andrea Morone and Tiziana Temerario). Economics and Business Letters (2021)
The recent literature on individual vs. group decision-making, in risky contexts, has brought about divergent results, mainly depending on the institutional rules through which groups take decisions. While some studies where group decisions relied on the majority rule showed no appreciable difference between individuals and groups’ preferences, others where unanimity among group members was required found collective decisions to be less risk averse than individual ones. We elicited groups’ preferences over risk using what we defined “endogenous decision rule”, i.e. leaving groups free to endogenously solve the potential disagreement among their members, just as in many real life situations. Our results unambiguously show that individuals are more risk seeker than groups when facing gambles with positive expected payoff difference and more risk averse in the opposite case.
Does a Financial Transaction Tax drive out information mirages? An experimental Analysis (with Andrea Morone, Pasquale Marcello Falcone, Piergiuseppe Morone). Journal of Economic Interaction and Coordination (2020)
Motivated by the debate over the economic implications of financial transaction taxes (FTTs), the present study involved a thorough investigation of the impact of such taxes on a financial market of the type described by Camerer and Weigelt (1991), whereby noise traders are unaware of whether privileged information is fluctuating in the market. Two treatment conditions were opposed to a baseline condition in which no tax was levied. The two treatment conditions imposed a transaction tax equal to 0.5% and 1% of each transaction’s market value, respectively. The findings show that: (i) the introduction of a tax did not affect the occurrence of a mirage, (ii) the introduction of a tax did not improve market efficiency and (iii) the introduction of a tax did not reduce the number of transactions.
Market Efficiency, Trading Institutions and Information Mirages: evidence from a laboratory asset market (with Andrea Morone). Journal of Economic Interaction and Coordiantion (2019)
The study at hand investigates the performance of a continuous double auction, and a call market mechanism in an experimental asset market where the presence of insiders is neither certain nor common knowledge. Inspired by Plott and Sunder (1982) and Camerer and Weigelt (1991), we test whether a discrete time mechanism of trading, like the call market, is able to prevent the occurrence of information mirages and to promote higher informational efficiency both in periods with and without insiders. We find that information mirages are widespread and equally likely to occur in the two trading mechanisms. Moreover, our results clearly show that call markets are as informationally efficient as double auction markets both in periods without and with inside information, thus allowing for equal profit sharing between insiders and non-insiders in the latter case. The only appreciable advantage of call markets is a significant reduction of price volatility when no inside information has entered the market, thus stabilizing prices in moments of high uncertainty.
The Dollar Auction Game: a laboratory comparison between individuals and groups (with Andrea Morone and Rocco Caferra). Group Decision and Negotiation (2019)
The aim of this paper is to analyze bidders’ behavior, comparing individuals and groups’ decisions within the dollar auction framework. This game induces subjects to fall prey into the paradigm of escalation, which is driven by agents’ commitment to higher and higher bids. Whenever each participant commits himself to a bid, the lower bidder, motivated by the wish to win as well as to defend his prior investment, finds it in his best interest to place a higher bid to overcome his opponent. The latter mechanism may lead subjects to overbid. We find that the Nash equilibrium of the game is only rarely attained. Second, we detect clean evidence that groups’ decisions are, on average, superior to individuals’ decisions. Learning over time is clearly evident, leading individuals to perform nearly as good as groups in the final rounds of the game.
Experimental Evidence on Tax Salience and Tax Incidence (with Andrea Morone and Francesco Nemore). Journal of Public Economic Theory (2018)
While a basic theoretical principle in public economics assumes that individuals optimize fully with respect to the introduction of a tax, a growing body of research is proving that several heuristics are in place when people take decisions. We re-examine the well-known Liability Side Equivalence principle in the light of the concept of salience. While these two topics have been extensively investigated in isolation, this paper innovates on the previous literature in that it focuses on their joint effects. Is tax incidence dependent on whether the subjects face a salient rather than a non-salient tax? Does the salience of a tax exert a different effect depending on who is legally committed to bear the tax burden? We address these questions through a laboratory experiment in which one unit of a fictitious good is being traded through a double-auction market institution. Based on a panel data analysis, our contribution shows that point of collection matter and determine the economic incidence of tax. Additionally we found that the joint effect of salience and statutory incidence does not alter the informative efficiency, but has a positive effect on buyers’ allocational efficiency when the tax is levied on sellers.
Asset Markets in the Lab: a literature review (with Andrea Morone). Journal of Behavioral and Experimental Finance (2017)
This paper aims at providing an overview of several topics that have been addressed in the field of experimental asset markets. Rather than being exhaustive in any single topic, this review is meant to gather the several research strands, and to provide a powerful picture of the main advances in the use of experimental techniques for the study of financial markets.