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Benchmarking information aggregation in experimental markets
Author(s) -
Albertazzi Andrea,
Mengel Friederike,
Peeters Ronald
Publication year - 2021
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.13010
Subject(s) - benchmarking , economics , aggregate (composite) , benchmark (surveying) , asset (computer security) , private information retrieval , microeconomics , contrast (vision) , electronic markets , financial market , capital asset pricing model , econometrics , financial economics , finance , computer science , materials science , computer security , management , geodesy , the internet , artificial intelligence , world wide web , composite material , geography
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.