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dc.contributor.authorKirstein, Annetteen_US
dc.contributor.authorKirstein, Rolanden_US
dc.description.abstractWe have experimentally tested a theory of bounded rational behavior in a "lemon market". It provides an explanation for the observation that real world players successfully conclude transactions when perfect rationality predicts a market collapse. We analyzed two different market designs : complete and partial market collapse. Our empirical observations deviate substantially from these theoretical predictions. In both markets, the participants traded more than theoretically predicted. Thus, the actual outcome is closer to efficiency than the theoretical prediction. Even after 20 repetitions of the first market constellation, the number of transactions did not drop to zero. Our bounded rationality approach to explain these observations starts with the insight that perfect rationality would require the players to perform an infinite number of iterative reasoning steps. Bounded rational players, however, carry out only a limited number of such iterations. We have determined the iteration type of the players independently from their market behavior. A significant correlation exists between iteration types and observed price offers.en_US
dc.relation.ispartofseriesCSLE Discussion Papers 2004-02en_US
dc.subject.keywordguessing gamesen_US
dc.subject.keywordbeauty contestsen_US
dc.subject.keywordmarket failureen_US
dc.subject.keywordadverse selectionen_US
dc.subject.keywordlemon problemen_US
dc.subject.keywordregulatory failureen_US
dc.subject.keywordpaternalistic regulationen_US
dc.subject.stwAsymmetrische Informationen_US
dc.subject.stwAdverse Selectionen_US
dc.subject.stwBeschränkte Rationalitäten_US
dc.titleLess Rationality, More Efficiency: a Laboratory Experiment on "Lemon" Markets.en_US
dc.typeWorking Paperen_US
Appears in Collections:CSLE Discussion Paper Series, CSLE - Center for the Study of Law and Economics, Universität des Saarlandes

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