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Understanding the Plott-Wit-Yang paradox
- 1.0339602 - NHU-C 2010 RIV CZ eng J - Journal Article
Kálovcová, K. - Ortmann, Andreas
Understanding the Plott-Wit-Yang paradox.
CERGE-EI Working Paper Series. -, č. 397 (2009), s. 1-15. ISSN 1211-3298
R&D Projects: GA MŠMT LC542
Institutional research plan: CEZ:MSM0021620846
Keywords : experimental betting markets * private information * information aggregation
Subject RIV: AH - Economics
http://www.cerge-ei.cz/pdf/wp/Wp397.pdf
Plott, Wit & Yang (2003) conduct a betting market experiment and find: First, information was aggregated. This suggests that traders updated their private information based on observed market odds. Second, a model based only on the use of private information seems to fit their data best. The authors call this paradoxical. Because the original data are lost, we replicate their experiment. Our results suggest that the paradox seems due to aggregate rather than individual level data analysis. We analyze the individual level data and explain the paradoxical results reported in Plott et al. (2003).
Permanent Link: http://hdl.handle.net/11104/0183078
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