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Speculation Rather than Enterprise? Keyness Beauty Contest Revisited in Theory and Experiment

Abstract : In Keynes’ beauty contest, agents make evaluations reflecting both an expected fundamental value and the conventional value expected to be set by the market. They thus respond to fundamental and coordination motives, respectively, the prevalence of either being set exogenously. Our contribution is twofold. First, we propose a valuation game in which agents strategically choose how to weight each motive. This game emphasises public information leads agents to favour the coordination motive. Second, we test the game through a laboratory experiment. Subjects tend to conform to theoretical predictions, except when fundamental uncertainty is low relative to strategic uncertainty.
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https://hal.univ-lorraine.fr/hal-02510843
Contributor : Touria Bagard <>
Submitted on : Wednesday, March 18, 2020 - 11:13:40 AM
Last modification on : Monday, September 14, 2020 - 1:58:28 PM

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Kene Boun My, Camille Cornand, Rodolphe dos Santos Ferreira. Speculation Rather than Enterprise? Keyness Beauty Contest Revisited in Theory and Experiment. SSRN : Social Science Research Network, Elsevier, 2017, ⟨10.2139/ssrn.2929999⟩. ⟨hal-02510843⟩

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