Let's Chat... When Communication Promotes Efficiency in Experimental Asset Markets
Brice Corgnet,
Mark DeSantis and
David Porter
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Mark DeSantis: Argyros School of Business and Economics & Economic Science Institute, Chapman University
Working Papers from Chapman University, Economic Science Institute
Abstract:
The growing prevalence of stock market chat rooms and social media suggests communication between traders may affect market outcomes. Using data from a series of laboratory experiments, we study the causal effect of trader communication on the price efficiency of markets. We show that communication allows markets to convey private information more effectively. This effect is most pronounced when the communication platform publicizes a reputation score that might identify a person as not being truthful. This illustrates the need for market designers to consider social interactions when designing market institutions to leverage the social motives that foster information aggregation.
Keywords: Information Aggregation; Market Efficiency; Communication; Experimental Asset Markets; Social Market Design (search for similar items in EconPapers)
JEL-codes: C92 G02 G14 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-exp and nep-fmk
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Citations: View citations in EconPapers (6)
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https://digitalcommons.chapman.edu/esi_working_papers/306/
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Working Paper: Let’s chat... When communication promotes efficiency in experimental asset markets (2020) 
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Persistent link: https://EconPapers.repec.org/RePEc:chu:wpaper:20-12
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