Aggregation and Dissemination of Information in Experimental Asset Markets in the Presence of a Manipulator
We study with the help of a laboratory experiment the conditions under which an uninformed manipulator –a robot trader that unconditionally buys several shares of a common value asset in the beginning of a trading period and unwinds this position later on –is able to induce higher asset prices. We find that the average contract price is significantly higher in the presence of the manipulator if, and only if, the asset takes the lowest possible value and insiders have perfect information about the true value of the asset. It is also evidenced that the robot trader makes trading gains; i.e., independently on whether the informed trader shave perfect or partial information, it earns always more than the average trader. Finally, not only uninformed subjects suffer from the presence of the robot trader, but also some of the imperfectly informed insiders have lower payoffs once the robot trader is added as a market participant.
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