Prediction Markets in the Laboratory
AbstractThe idea that there is wisdom from the collective has been forcefully described in “The Wisdom of the Crowds” by James Surowiecki, who argues that the aggregation of information in groups results in better decisions than those that are afforded by any single member of the group. Markets, like opinion polls, are one mechanism for aggregating disparate pieces of information. The aggregation properties of prices were first noted by Hayek (1945) and were formally examined by Muth (1961). In particular, Hayek argues that market prices serve the purpose of sharing and coordinating local and personal knowledge, while Muth shows that markets do not waste information and that the current price contains all the information available from market participants.
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Bibliographic InfoPaper provided by Chapman University, Economic Science Institute in its series Working Papers with number 13-05.
Length: 33 pages
Date of creation: 2013
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-26 (All new papers)
- NEP-EXP-2013-01-26 (Experimental Economics)
- NEP-FOR-2013-01-26 (Forecasting)
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