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The Market Value of Information: Some Experimental Results

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  • Copeland, Thomas E
  • Friedman, Daniel

Abstract

The authors examine the price and allocation of purchased information and of the underlying asset in eight double-auction asset market experiments. Observed outcomes support fully revealing rational expectations in simple environments in which uninformed traders can easily infer the private information of informed traders but support nonrevealing rational expectations in more complex environments. The private value of information is positive in the more complex (noisy) environments but competition forces the information price to its Nash equilibrium value and the net gain by purchasers is approximately zero. Copyright 1992 by University of Chicago Press.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 65 (1992)
Issue (Month): 2 (April)
Pages: 241-66

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Handle: RePEc:ucp:jnlbus:v:65:y:1992:i:2:p:241-66

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Web page: http://www.journals.uchicago.edu/JB/

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Cited by:
  1. Jürgen Huber & Matthias Sutter & Michael Kirchler, 2004. "Is more information always better? Experimental financial markets with asymmetric information," Papers on Strategic Interaction 2005-13, Max Planck Institute of Economics, Strategic Interaction Group.
  2. Oehler, Andreas & Unser, Matthias, 1998. "Market Transparency and Call Markets," Discussion Papers 6, University of Bamberg, Chair of Finance.
  3. M. Middeldorp & S. Rosenkranz, 2008. "Central bank communication and crowding out of private information in an experimental asset market," Working Papers 08-26, Utrecht School of Economics.
  4. Jürgen Huber & Martin Angerer & Michael Kirchler, 2011. "Experimental asset markets with endogenous choice of costly asymmetric information," Experimental Economics, Springer, vol. 14(2), pages 223-240, May.
  5. Ackert, Lucy F. & Church, Bryan K. & Shehata, Mohamed, 1997. "Market behavior in the presence of costly, imperfect information: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 33(1), pages 61-74, May.
  6. David Bodoff & Hugo Levecq & Hongtao Zhang, 2006. "EDGAR on the internet: The welfare effects of wider information distribution in an experimental market for risky assets," Experimental Economics, Springer, vol. 9(4), pages 361-381, December.
  7. Martin Barner & Francesco Feri & Charles R. Plott, 2005. "On the microstructure of price determination and information aggregation with sequential and asymmetric information arrival in an experimental asset market," Annals of Finance, Springer, vol. 1(1), pages 73-107, 01.
  8. Carl Plat, 2005. "A Double Auction Market with Signals of Varying Precision," Experimental 0508004, EconWPA.
  9. Gary Charness & Uri Gneezy, 2010. "Portfolio Choice And Risk Attitudes: An Experiment," Economic Inquiry, Western Economic Association International, vol. 48(1), pages 133-146, 01.
  10. Huber, Jurgen & Kirchler, Michael & Sutter, Matthias, 2008. "Is more information always better: Experimental financial markets with cumulative information," Journal of Economic Behavior & Organization, Elsevier, vol. 65(1), pages 86-104, January.
  11. Dennis Dittrich & Boris Maciejovsky, . "Information Dissemination on Asset Markets with Endogenous and Exogenous Information: An Experimental Approacha," Papers on Strategic Interaction 2002-03, Max Planck Institute of Economics, Strategic Interaction Group.
  12. M. Middeldorp & S. Rosenkranz, 2008. "Information acquisition in an experimental asset market," Working Papers 08-25, Utrecht School of Economics.
  13. Ackert, Lucy F. & Church, Bryan & Jayaraman, Narayanan, 2001. "An experimental study of circuit breakers: The effects of mandated market closures and temporary halts on market behavior," Journal of Financial Markets, Elsevier, vol. 4(2), pages 185-208, April.
  14. Huber, Jurgen, 2007. "`J'-shaped returns to timing advantage in access to information - Experimental evidence and a tentative explanation," Journal of Economic Dynamics and Control, Elsevier, vol. 31(8), pages 2536-2572, August.

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