Advice in the Marketplace: A Laboratory Study
Alevy, Jonathan ; Price, Michael
Citations
Abstract
There is substantial evidence that the decisions of experienced and inexperienced agents differ in ways that impact both individual earnings and aggregate market outcomes. Typically, such evidence is gathered by studying experience as it accumulates within subjects. We examine a new question; whether behaviors associated with experience can be transferred directly to new market participants. Specifically, we study the intergenerational transmission of information, including direct advice, in experimental asset markets. Empirical results suggest that advice is a good substitute for experience; prices in sessions with advised traders shift towards fundamentals. Further, convergence towards fundamentals holds in mixed-markets where only a subset of traders are advised. Such data patterns are consistent with recent neurological evidence on fictive learning.