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Measuring the impact of information aggregation mechanisms: An experimental investigation

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  • Bennouri, Moez
  • Gimpel, Henner
  • Robert, Jacques

Abstract

This paper measures the effectiveness of market-based and cheap-talk information aggregation. Both information aggregation mechanisms (IAMs) are frequently used prior to IPOs and sales of Treasury bonds - it is largely acknowledged that they provide agents with useful information for subsequent bidding. In a laboratory experiment, we study how information provided by IAMs interacts with private and public information and how agents integrate it in their strategic behavior in a multi-unit common-value uniform-price auction. In market-based IAMs, information gathering prevails and subsequent bidding shows that subjects acknowledge the precision of information. However, in cheap-talk IAMs, there is almost no transmitted information.

Suggested Citation

  • Bennouri, Moez & Gimpel, Henner & Robert, Jacques, 2011. "Measuring the impact of information aggregation mechanisms: An experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 78(3), pages 302-318, May.
  • Handle: RePEc:eee:jeborg:v:78:y:2011:i:3:p:302-318
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    5. Goodell, John W. & McGroarty, Frank & Urquhart, Andrew, 2015. "Political uncertainty and the 2012 US presidential election: A cointegration study of prediction markets, polls and a stand-out expert," International Review of Financial Analysis, Elsevier, vol. 42(C), pages 162-171.

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