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, Orange, CA, 92866

No 2010, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

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
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Citations: View citations in EconPapers (5)

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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:gat:wpaper:2010

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