In this paper relationship between the market overconfidence and occurrence of the stock-prices' bubbles is investigated. Sixty participants traded in ten experimental markets of the two types: rational and overconfident. Markets are constructed on the basis of subjects' overconfidence, measured in the administered pre-experimental psychological test sessions. The most overconfident subjects form overconfident markets, and the least overconfident -rational markets. Empirical evidence presented in the paper refines differences between market outcomes in the experimental treatments and suggests the connection between market overconfidence and market outcomes. Prices in rational markets tend to track the fundamental asset value more accurately than prices in overconfident markets, and are significantly lower and less volatile than the average overconfident prices. Strong positive correlation between market outcomes and overconfidence measures draws conclusion, that an increase in market overconfidence is associated with the increase in average price and trading activity. Large and significant correlation between bubble measures and measures of overconfidence provide additional evidence that overconfidence has significant effect on price and trading behavior in experimental asset markets.

Prior experiments revealed that investors' overconfidence can result in excessive trade and negative wealth effects. However, in most of these studies, informational asymmetries were part of the experimental design, and therefore no clear conclusion on whether the obtained results were driven by overconfidence or informational asymmetries could be made. The article addresses this issue by analysing individual financial decisions based on the study of Michailova and Schmidt, who ran an asset markets experiment with no informational asymmetries. Additionally, the study controls for differences in individual risk aversion. The data revealed that, in this setting, individual trading activity and performance were influenced by overconfidence only for female participants. Mistakes in future price forecasting, which were negatively correlated with overconfidence, partially accounted for this result. Risk aversion was uncorrelated with overconfidence and had no influence on experimental outcomes.

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Previous research has demonstrated that in naturalistic risky decisions people tend to have little interest in receiving information about probabilities. The present research asked whether subjects search for and employ probabilistic information in situations that are representative of natural disasters: namely, situations where (1) they have no control over the occurrence of a negative event and (2) there might be huge losses of physical and human capital. Pseudo-realistic scenarios involving risky situations were presented to 116 experimental participants. Based on the active information search paradigm, subjects were given only a basic description of the situation and had to acquire additional information from the experimenter. In addition to the main task, the individual risk aversion of participants was measured. We demonstrate that in pseudo-naturalistic scenarios involving natural disasters people tend to show more interest in probabilities compared to scenarios with generally more controllable risks. Moreover, this interest increases with an increase in the importance of the situation to the decisionmaker. The importance of the situation also has a positive influence on the thoroughness of information search. The experiment detected no connection between individual risk aversion and information search.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe examine the effects of money priming and solidarity on individual behavior in three simple experiments: dictator game, ultimatum game, and prisoner's dilemma. Our study comprises two money treatments and two neutral (control) treatments. Additionally, we control for the strength of social ties between experimental participants. Although our priming procedure is sufficient to remind people of the concept of money, it is not sufficient to induce systematically different behavior of the treatment groups compared to the control groups.Moreover, we do not find any significant differences between groups with strong vs. weak social ties. Since our findings contradict previous research, it calls for further investigation on the topic of how money priming influences economic behavior. JEL: C78, C9, D36PsycINFO: 3020Keywords: money priming; bargaining; dilemma; social behavior; natural groups; economic experiment Acknowledgements: We want to express our gratitude to Kathleen D. Vohs and Agata Gasiorowska for valuable comments. We thank Katharina Gangl for helping with manipulation check.