Benchmarking information aggregation in experimental markets
(2021) In Economic Inquiry 59(4). p.1500-1516- Abstract
Theoretical and experimental literature have provided mixed insights on the ability of financial markets to perfectly aggregate private information into asset prices. We conduct an experiment designed to benchmark information aggregation in markets. In our lab experiment, we randomly assign subjects to different institutional environments, either a market or a Becker–DeGroot–Marschak mechanism. We find evidence that market interaction is worse for information aggregation. The difference between the two environments is driven by price-insensitive traders who seem unable to learn from market prices. Price-sensitive traders, by contrast, learn equally well in both environments.
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https://lup.lub.lu.se/record/b6d7082f-0945-449f-9aeb-654919ba201f
- author
- Albertazzi, Andrea ; Mengel, Friederike LU and Peeters, Ronald
- organization
- publishing date
- 2021
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- experiment, information aggregation, markets
- in
- Economic Inquiry
- volume
- 59
- issue
- 4
- pages
- 1500 - 1516
- publisher
- Wiley-Blackwell
- external identifiers
-
- scopus:85109097270
- ISSN
- 0095-2583
- DOI
- 10.1111/ecin.13010
- language
- English
- LU publication?
- yes
- id
- b6d7082f-0945-449f-9aeb-654919ba201f
- date added to LUP
- 2021-08-13 08:12:18
- date last changed
- 2022-04-27 03:04:03
@article{b6d7082f-0945-449f-9aeb-654919ba201f,
abstract = {{<p>Theoretical and experimental literature have provided mixed insights on the ability of financial markets to perfectly aggregate private information into asset prices. We conduct an experiment designed to benchmark information aggregation in markets. In our lab experiment, we randomly assign subjects to different institutional environments, either a market or a Becker–DeGroot–Marschak mechanism. We find evidence that market interaction is worse for information aggregation. The difference between the two environments is driven by price-insensitive traders who seem unable to learn from market prices. Price-sensitive traders, by contrast, learn equally well in both environments.</p>}},
author = {{Albertazzi, Andrea and Mengel, Friederike and Peeters, Ronald}},
issn = {{0095-2583}},
keywords = {{experiment; information aggregation; markets}},
language = {{eng}},
number = {{4}},
pages = {{1500--1516}},
publisher = {{Wiley-Blackwell}},
series = {{Economic Inquiry}},
title = {{Benchmarking information aggregation in experimental markets}},
url = {{http://dx.doi.org/10.1111/ecin.13010}},
doi = {{10.1111/ecin.13010}},
volume = {{59}},
year = {{2021}},
}