The bubble-and-burst pattern in asset markets is among the most replicable results in experimental economics. Using controlled laboratory experiments, we compare mispricing in markets organized by standard double auction rules with mispricing in markets organized by two alternative sets of clock auctions. The double Dutch auction, shown to be more efficient than the double auction in past commodity market experiments, does not eliminate bubbles. However, the English Dutch auction yields prices reflective of underlying fundamentals and succeeds in taming bubbles even with inexperienced traders in a declining fundamental value environment with an increasing cash-to-asset ratio.
Bibliographical noteDeck, Cary, Maroš Servátka, and Steven Tucker. 2020. "Designing Call Auction Institutions to Eliminate Price Bubbles: Is English Dutch the Best?" American Economic Review: Insights, 2 (2): 225-36.