Pari-mutuel information aggregation mechanisms with public knowledge

Jared Bullen, Jordi McKenzie

Research output: Contribution to journalArticlepeer-review

Abstract

A number of experimental studies have found that pari-mutuel markets possess the ability to aggregate information privately held by individuals and therefore act as prediction markets. However, all previous studies have assumed that information is privately and independently distributed. In real world environments the distribution of information is unlikely to take this form. This paper investigates, experimentally, an information structure in which there is both private and public information. It is found that this structure induces a 'public knowledge bias' which limits the market's ability to aggregate information to the extent that the public information reduces the market’s predictive performance.
Original languageEnglish
Pages (from-to)23-43
Number of pages21
JournalJournal of prediction markets
Volume4
Issue number2
DOIs
Publication statusPublished - 2010
Externally publishedYes

Keywords

  • information aggregation
  • laboratory experiment
  • pari-mutuel
  • prediction market

Fingerprint Dive into the research topics of 'Pari-mutuel information aggregation mechanisms with public knowledge'. Together they form a unique fingerprint.

Cite this