An experimental investigation of asset market bubbles and of the effects of regret and the illusion of control in decision making

Elliott, Maya (2012) An experimental investigation of asset market bubbles and of the effects of regret and the illusion of control in decision making. Doctoral thesis, University of East Anglia.

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Abstract

Abstract
This thesis extends existing research in two separate areas of experimental economics and contains three distinct experimental studies. The first two chapters are concerned with the bubbles that have long been observed in experimental asset markets and are inspired partially by real bubbles observed in the housing market. The first chapter reports an experiment designed to capture evidence of herding behaviour and the effects of regret on bubbles. The second chapter examines the impact of speculation on prices and considers how the nature of the fundamental value of the asset traded may be a possible cause of asset market bubbles. A single, lumpy asset is traded as a closer approximation to a house purchase than the multi-unit type of asset usually traded in experimental markets and the fundamental value is designed to rise rather than fall to better capture the usual direction of housing market fundamentals. In chapter one it is found that herding tendencies and fear of regret may have some impact upon bubbles and evidence of learning is also present. In chapter 2, the impacts of speculation and an increasing fundamental value do not provide the hypothesised outcomes, but bubbles are perhaps prevented by the quality of the information given to subjects. The third chapter contains an experimental exploration of the impact of regret and of illusion of control on decision making in an experimental setting using national lottery scratch cards to elicit the emotion of regret and the selection of coloured envelopes to provoke the illusion of control in subjects. It finds support for the notion that regret, particularly feedback conditional regret, impacts on decisions and specifically on the willingness to part with the card for a cash sum.

Item Type:	Thesis (Doctoral)
Faculty \ School:	Faculty of Social Sciences > School of Economics
Depositing User:	Users 2259 not found.
Date Deposited:	05 Mar 2014 10:09
Last Modified:	05 Mar 2014 10:09
URI:	https://ueaeprints.uea.ac.uk/id/eprint/47904
DOI:

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