Seminar| Institute of Mathematical Sciences
Time: Friday, April 24th, 2026,10:00-11:00
Location: IMS, RS408
Speaker: Nan Chen, Chinese University of Hong Kong
Abstract: AI agents participate in both rational and irrational bubbles. In a sequential bubble game, AI agents generate speculative trades even though there is a unique no-trade equilibrium. Increasing reasoning capacity reduces, but does not eliminate, such irrational bubbles. Chain-of-thought analysis shows that AI agents participate in irrational bubbles because they form incorrect beliefs through simplified expectations of the market, and they are sensitive to framing effects when forming their beliefs. When the environment admits both a no-trade equilibrium and a speculative bubble equilibrium, AI agents recognize this multiplicity and coordinate on the speculative equilibrium. Our results suggest that greater AI sophistication does not necessarily eliminate bubbles or improve market efficiency.