Understanding the Plott-Wit-Yang Paradox

Katarina Kalovcova and Andreas Ortmann

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: Plott, Wit & Yang (2003) conduct a betting market experiment and nd: First, information was aggregated. This suggests that traders updated their private information based on observed market odds. Second, a model based only on the use of private information seems to fit their data best. The authors call this paradoxical. Because the original data are lost, we replicate their experiment. Our results suggest that the paradox seems due to aggregate rather than individual level data analysis. We analyze the individual level data and explain the paradoxical results reported in Plott et al. (2003).

Keywords: Experimental betting markets; private information; information aggregation. (search for similar items in EconPapers)
JEL-codes: D81 D82 G14 (search for similar items in EconPapers)
Date: 2009-11
New Economics Papers: this item is included in nep-cta and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: Understanding the Plott-Wit-Yang Paradox (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:cer:papers:wp397

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