Equilibrium dominance in experimental financial markets

We examine the predictive power of equilibrium dominance inexperimental markets where firms with investment opportunitieshave an informational advantage over potential investors andare permitted to purchase a money-burning signal. Equilibriumdominance often fails to predict well when a Pareto-superiorsequential equilibrium is also available. Instead, equilibriumselection appears to be related to the potential earnings ofa more valuable firm that can signal its type successfully bydefecting from the sequential equilibrium.     

The impact of circular migration on a village economy

The author examines the economy of a rural village in Indonesia in which a high proportion of households rely on remittances from urban informal sector earnings. Household income and per capita income are analyzed according to whether or not households have at least one temporary migrant, and by the sex and age of the household head. Findings indicate that "remittances from short-term circular migration push many households into the middle and upper income ranges. However, the wealthiest households continue to rely on traditional high earning activities and do not depend on remittances. The poorest households are scattered among those who rely on remittances and those still totally dependent upon traditional low earning village activities, regardless of the sex and age of the household head."     

Pooling, separating, and semiseparating equilibria in financial markets: some experimental evidence

This study investigates experimental financial markets in whichfirms possess more information than do potential investors.Firms were given opportunities to undertake positive net presentvalue projects which they could either forgo or finance by sellingequity. Auctions were conducted among the investors for theright to finance the projects. When the theoretical equilibriumwas unique, theory predicted well. When theory permitted pooling,separation, and semiseparation, only the more efficient poolingequilibrium was observed. The domination of the pooling equilibriumwas robust to different experimental experiences by participants.When available, signals were used by good firms to distinguishthemselves from bad.