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.
This paper investigates to what extent laboratory measures of cheating generalise to the field. To this purpose, we develop a lab measure that allows for individual-level observations of cheating whilst reducing the likelihood that participants feel observed. Decisions made in this laboratory task are then compared to individual choices taken in the field, where subjects can lie by misreporting their experimental earnings. We use two field variations that differ in the degree of anonymity of the field decision. According to our measure, no correlation of behaviour between the laboratory and the field is found. We then perform the same analysis using a lab measure that can only detect cheating at the aggregate level. In this case, we do find a weak correlation between the two environments. We discuss the significance and interpretation of these results.
We perform a controlled experiment to study the welfare effects of competition in a strategic communication environment. Two equally informed senders with conflicting interests can misreport information at a cost that is increasing in the size of the lie. We compare a treatment where only one sender communicates with a treatment where both senders communicate simultaneously with a decision-maker. We find that the introduction of competition between senders decreases the welfare of all players.Competing senders reveal the truth less often and spend about twice the amount of resources to misreport information than their monopolistic counterpart. As a result, decision-makers take more informed choices when consulting one sender than when consulting both.
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