Working Papers - details - WEF0045
WEF0045
No-Trade in the Laboratory
Marco Angrisani, Antonio Guarino, Steffen Huck and Nathan Larson
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Abstract
We test the no-trade theorem in a laboratory nancial market where subjects can
trade an asset whose value is unknown. Subjects receive clues on the asset value
and then set a bid and an ask at which they are willing to buy or to sell from the
other participants. In treatments with no gains from trade, theory predicts no trading activity, whereas, in treatments with gains, trade becomes theoretically possible. Our
experimental results show that subjects fail to reach the no-trade equilibrium by pure
introspection, but they learn to approach it over time, through market feedback and
learning.