TY - JOUR
T1 - Information aggregation in double auctions
T2 - Rational expectations and the winner's curse
AU - Guarnaschelli, Serena
AU - Kwasnica, Anthony M.
AU - Plott, Charles R.
N1 - Funding Information:
1. Effort sponsored by the Defense Advanced Research Projects Agency (DARPA) and Air Force Research Laboratory, Air Force Material Command, USAF, under agreement number F30602-00-2-0623. The U.S. Government is authorized to reproduce and distribute reprints for Governmental purposes notwithstanding any copyright annotations thereon. The views and conclusions contained herein are those of the authors and should not be interpreted as necessarily representing the official policies or endorsements, either expressed or implied, of the Defense Ad-vanced Research Projects Agency (DARPA), the Air Force Re-search Laboratory, or the U.S. Government. Additional support
Funding Information:
of the National Science Foundation is also acknowledged as is the support of the Laboratory for Experimental Economics and Political Science of the California Institute of Technology.
PY - 2003/1
Y1 - 2003/1
N2 - This paper inquires about the ability of double auction institutions to aggregate information in the context of a "common value" information structure that is known to produce the winner's curse in sealed bid environments. While many fundamental features of the economic trading mechanism are different from those studied in the context of sealed bids, the pattern of information distributed to the population of traders is the same. This gives us an opportunity to determine if the behaviors reported in sealed bid environments can be detected in the more active market environment. As such, the experiments are also a test of the robustness of earlier experiments that demonstrate that in economies with homogeneous preferences single compound securities organized by double auctions are able to aggregate information. The basic result is that a severe winner's curse is not observed. The irrationality observed in sealed bids does not extend itself to the double auction environment. Information aggregation is observed and the rational expectations model receives support.
AB - This paper inquires about the ability of double auction institutions to aggregate information in the context of a "common value" information structure that is known to produce the winner's curse in sealed bid environments. While many fundamental features of the economic trading mechanism are different from those studied in the context of sealed bids, the pattern of information distributed to the population of traders is the same. This gives us an opportunity to determine if the behaviors reported in sealed bid environments can be detected in the more active market environment. As such, the experiments are also a test of the robustness of earlier experiments that demonstrate that in economies with homogeneous preferences single compound securities organized by double auctions are able to aggregate information. The basic result is that a severe winner's curse is not observed. The irrationality observed in sealed bids does not extend itself to the double auction environment. Information aggregation is observed and the rational expectations model receives support.
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U2 - 10.1023/A:1022045923185
DO - 10.1023/A:1022045923185
M3 - Article
AN - SCOPUS:0037258439
SN - 1387-3326
VL - 5
SP - 63
EP - 77
JO - Information Systems Frontiers
JF - Information Systems Frontiers
IS - 1
ER -