Unleashing Animal Spirits – Self-Control and
Overpricing in Experimental Asset Markets
Martin G. Kocher
Konstantin E. Lucks
David Schindler
1
Agenda
•
•
•
•
Introduction
Experiment I
Experiment II
Main message
2
Introduction
Irrational Behavior?
ANIMAL SPIRITS!
3
Introduction
Research Question:
Does a lack of self-control lead to price
exaggeration on an asset market?
Psychol. def.: Capacities to override or inhibit undesired
behavioral tendencies such as impulses and to refrain
from acting on them.
4
Introduction
Q: How do I know?
A:
Deplete people of their selfcontrol, let them trade assets
and see what happens!
5
Experiment I
Participants
• 160 students
• 10 experimental sessions
• No experience with asset market experiments
6
Experiment I
Stroop Task
Cognitive
Dissonance
Conflict has
to be
resolved
Self-Control
Depletion
7
Experiment I
Stroop Task
HIGHSC traders
LOWSC traders
8
Experiment I
Stroop Task
• Self-control depletion successful?
Yes! Stroop test worked
– LOWSC group
• Fewer attempted problems
• More mistakes
• Perceived task as more demanding than HIGHSC group
9
Experiment I
Asset Market
• 16 traders on each market
• 10 trading periods
• Double auction market (bids and asks)
0,5
Dividend
0,5
10
0
10
Experiment I
Asset Market
• Significant overpricing in both trading
groups
• HIGHSC: 19%
• LOWSC: 50%
 LOWSC significantly higher
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Experiment II: Mixed Markets
5 HIGHSC and 5 LOWSC traders per market
• Overpricing significantly higher on mixed
markets than on HIGHSC markets
• Almost identical to LOWSC market
 HIGHSC imitates LOWSC
 Excessive average overpricing
12
Main Message
• Self-control depletion can lead to overpricing
• Moderate share of low self-control traders
enough to trigger overpricing
• High self-control traders imitate low selfcontrol traders
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THANK YOU!