Published In
International Journal of Economics and Business Research
Document Type
Post-Print
Publication Date
1-1-2015
Subjects
Information integration, prediction markets, market processes, prisoner's dilemma, emergence, information mirage
Abstract
The desire to understand the mechanisms of market information integration motivates this study. Experimental prediction markets are used in a large sample study and the results from the markets as well as individuals' actions are analyzed. By varying the presence and type of feedback the mechanisms of information collection and information aggregation were studied. Markets without feedback demonstrated information collection by outperforming the average of their participants. When feedback was introduced the inductive process of information aggregation was observed. This process was seen to simultaneously increase the amount of information assimilated, but also introduce information mirages which tend to decrease the accuracy of the markets - being dependent on the type of data presented to the market. In fact, a market subject to mirage prone data resembles a Prisoner's Dilemma where individual rationality results in collective irrationality. Analysis of all individuals' feedback market responses also revealed characteristics of public and private information integration. The integration effect for individuals was subtle compared to the more distinct effect in markets, illustrating the emergent character of information aggregation in markets
Rights
This is the post-print version. The final version, © Inderscience Enterprises Ltd. is available from the publisher: https://www.inderscience.com/info/inarticle.php?artid=66032
Persistent Identifier
https://archives.pdx.edu/ds/psu/42567
Citation Details
Jolly, R.D., Zwick, M., Wakeland, W. and Woods, J. (2015) [Post-print] The mechanisms of information integration in experimental prediction markets, International Journal of Economics and Business Research, Vol. 9, No. 1, pp.100–129.