Document Type
Article
Publication Date
3-2020
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.
Recommended Citation
Corgnet, B., DeSantis, M., & Porter, D. (2020). Let’s chat... When communication promotes efficiency in experimental asset markets. ESI Working Paper 20-12. https://digitalcommons.chapman.edu/esi_working_papers/306/
Comments
ESI Working Paper 20-12
This paper later underwent peer review and was posted as:
Corgnet, B., DeSantis, M., & Porter, D. (2023). Let’s chat... When communication promotes efficiency in experimental asset markets. Management Science. https://doi.org/10.1287/mnsc.2023.4967