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Economic Theory

, Volume 22, Issue 2, pp 311–351 | Cite as

Parimutuel betting markets as information aggregation devices: experimental results

  • Charles R. Plott
  • Jorgen Wit
  • Winston C. Yang
Research Article

Summary.

The demonstrated capacity of markets to aggregate information motivates research on alternative institutions designed to do the same task. This study inquires about forms of parimutuel betting systems. Measures of information aggregation for performance evaluation are introduced. Two environments are studied. The first poses a simpler aggregation problem than does the second. Information aggregation can be detected under both environments but the degree depends on the choice of baselines. The competitive equilibrium rational expectations model is clearly the best model in the simpler environment but, in the more complex environment, models based on private information alone are more accurate. Bluffing and waiting inhibit aggregation and time and experience are conjectured to lead to more rational expectations-like performance.

Keywords and Phrases:General: laboratory, Individual and group behavior, Information and uncertainty, Asymmetric and private Information. 
JEL Classification Numbers:C90, C91, C92, D8, D40, D82. 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2003

Authors and Affiliations

  • Charles R. Plott
    • 1
  • Jorgen Wit
    • 2
  • Winston C. Yang
    • 1
  1. 1.Division of the Humanities and Social Sciences, California Institute of Technology, Pasadena, CA 91125, USA (e-mail: cplott@hss.caltech.edu) US
  2. 2.JPMorgan Chase, Edison, NJ 08837, USA (e-mail: Jorgen.Wit@chase.com) US

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