Information Aggregation in Arrow-Debreu Markets: An Experiment

Journal article
(Original article)


Publication Details

Author(s): Choo L, Kaplan TR, Zultan R
Journal: Experimental Economics
Publication year: 2017
ISSN: 1386-4157
Language: English


Abstract


Studies of experimental and betting markets have shown that markets are able to efficiently aggregate information dispersed over many traders. We study information aggregation in Arrow-Debreu markets using a novel information structure. Compared to previous studies, the information structure is more complex, allows for heterogeneity in information among traders -- which provides insights into the way in which information is gradually disseminated in the market -- and generates situations in which all traders hold identical beliefs over the traded assets' values, thus providing a harsh stress test for belief updating. We find little evidence for information aggregation and dissemination in early rounds. Nonetheless, after traders gain experience with the market mechanism and structure, prices converge to reveal the true state of the world. Elicited post-market beliefs reveal that markets are able to efficiently aggregate dispersed information even if individual traders remain uninformed, consistent with the marginal trader hypothesis.



 


FAU Authors / FAU Editors

Choo, Lawrence
Lehrstuhl für Volkswirtschaftslehre, insbesondere Wirtschaftstheorie


How to cite

APA:
Choo, L., Kaplan, T.R., & Zultan, R. (2017). Information Aggregation in Arrow-Debreu Markets: An Experiment. Experimental Economics. https://dx.doi.org/10.1007/s10683-017-9548-x

MLA:
Choo, Lawrence, Todd R. Kaplan, and Ro'i Zultan. "Information Aggregation in Arrow-Debreu Markets: An Experiment." Experimental Economics (2017).

BibTeX: 

Last updated on 2018-19-04 at 04:21