A Bias Aggregation Theorem

In a market where some traders are rational (maximize expected utility) and others are systematically biased (deviate from expected utility due to some bias parameter, ?), do equilibrium prices necessarily depend on ?? In this note, focusing on the case where there is an aggregate and systematic bias inthe population, we show that market prices can still be unbiased. Hence, we establish that systematically biased agents do not necessarily imply biased market prices. We show that the parametric model we use also predicts observed deviations from expected utility in laboratory and market environments.