Information diffusion and aggregation over separated markets. An experiment (joint with Todd R. Kaplan and Xiaoyu Zhou)
Abstract : We use an experiment to study the information aggregation properties of markets when diverse and partial information about the true state of the world is held by informed traders who can only trade in different markets. We find that market prices in the different markets can accurately price the true state when there are uninformed intermediaries who are able to trade across the different markets. More specifically, we show that intermediaries with no prior information about the true state can facilitate the diffusion and aggregation of information across the different markets even when they have no incentives to do so. Furthermore, the accuracy of market prices do not depend on the degree of competition amongst the intermediaries. To summarise, we show that the market’s efficiency at aggregating information does not require all traders to interact with each other. This suggests that market prices can be informative even in the presences of market segmentation or fragmentation.
* 본 세미나는 VEAEBES(Virtual East Asia Experimental and Behavioral Economics Seminar series) 주최로 열리는 세미나입니다.
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