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Bonus structures and bubble formation in experimental asset markets

X. Wang & Yukihiko Funaki

Journal of Behavioral and Experimental Finance2026https://doi.org/10.1016/j.jbef.2026.101147article
AJG 1ABDC A
Weight
0.50

Abstract

In this study, we examine how different tournament-style bonus structures influence asset bubbles in experimental markets. We compare two structures: one that rewards a broad group of traders (“Bonus for Most”) and another that rewards only a few top performers (“Bonus for Few”). The findings indicate that the Bonus for Most structure is more likely to exacerbate bubble formation when traders gain experience. Under this structure, traders are more inclined to buy overpriced assets, not to improve long-term performance, but to boost short-term portfolio values and increase their chances of earning a bonus. This behavior, referred to as strategic asset accumulation, is less common under Bonus for Few, which offers lower opportunities for such manipulation-driven rewards. These findings demonstrate how short-term tournament incentives can unintentionally amplify price distortions, underscoring the importance of thoughtful incentive design in supporting market efficiency and stability.

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https://doi.org/https://doi.org/10.1016/j.jbef.2026.101147

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@article{x.2026,
  title        = {{Bonus structures and bubble formation in experimental asset markets}},
  author       = {X. Wang & Yukihiko Funaki},
  journal      = {Journal of Behavioral and Experimental Finance},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1016/j.jbef.2026.101147},
}

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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