Contrib. 1d:

Mimetic rational expectations

Markets show "reflexivity" when their actions are inspired by their own
behavior rather than by reality (fundamentals).

This imitative conduct has its rational side and may allow to gain from it.
Except of course if, by wearing off, or after a massive event, it ends up
being put in check.

Alexandre Delaigue seized a real-life example by watching a TV game.

Communication from Alexandre Delaigue, 29.06.2000

    (an animator of the French website:

The soccer Euro cup was a new opportunity to check the difference
between mimetic behavior and fundamentalist behavior.
We saw it in the France2 TV channel, with the "podium game".

Here is the principle : during each match, the viewers phone and
name the 3 players they feel are the best of that match. The game
bring prizes: the viewer giving the ranking that is the closest to the
final one wins a TV set.

So, here is the problem: is it better to select the players it thinks are
bests ? Or to try to forecast those the other viewers will consider
the bests?

The initiated will have recognized the famous Keynesian beauty

The interest of the game was to show that, in that case, the
fundamentalist behavior (to choose the best players by using
objective criteria) is clearly anti-optimal.
The typical example was the third match played by Portugal
(against Germany, victory 3-0). Once the podium is announced,
surprise! It includes two players (Figo and another one) that
never left the side bench during the match!

How to explain that?

Just because the viewers, instead of trying to find the good players
in the match, preferred to anticipate the general opinion. And for
that, they chose the best-known players. Who cares if they did not play.
And these viewer were right: the moronic one who made absent players
play won a TV set! While the one who patiently dissected the match
spent 3,23 F in phone call for no avail...

The fascinating side of the game, is that it shows the total randomness
of the ranking outcomes.


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