Sunspots in the Laboratory
NOTE: At the time of publication, the author Eric Fisher was not yet affiliated with Cal Poly.
We show that extrinsic or non-fundamental uncertainty influences markets in a controlled environment. This work provides the first direct evidence of sunspot equilibria. These equilibria require a common understanding of the semantics of the sunspot variable, and they appear to be sensitive to the flow of information. Extrinsic uncertainty matters when information flows slowly, as in a call market, but it need not matter when information flows quickly, as in a double auction where infra-marginal bids and offers are observable.
John Duffy and Eric O'N. Fisher. "Sunspots in the Laboratory" The American Economic Review 95.3 (2005): 510-529.
Available at: http://works.bepress.com/efisher/30