Abstract

It has been well-recognized that markets can aggregate less-than-perfect information across market participants. With two differently designed securities, this work examines the impact of security design on the information aggregation ability of markets in laboratory experiments. Results show that markets with one security aggregate information significantly better than markets with the other security, implying that information aggregation ability of markets is affected by the security design. Behavior of individual participants is then investigated to understand the observed market behavior. JEL Classification: C92; C91; D80

Citations