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Advice in the marketplace: a laboratory study

Published online by Cambridge University Press:  14 March 2025

Jonathan E. Alevy  and
Michael K. Price
Jonathan E. Alevy*
Affiliation:
Department of Economics and Public Policy, College of Business and Public Policy, University of Alaska Anchorage, 3211 Providence Drive, RH 302, 99508 Anchorage, AK, USA
Michael K. Price
Affiliation:
Department of Economics, Andrew Young School of Public Policy, Georgia State University, 14 Marietta Street, NW, 30303 Atlanta, GA, USA
*
[email protected]
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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 over time. 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 substitute for experience. Prices in sessions with advised traders shift towards fundamentals—a pattern consonant with prior work exploring the impact of own-experience on pricing dynamics. Further, convergence is observed in mixed-markets where only a subset of traders are advised.

Keywords

Asset marketsLaboratory experimentsAdvice

JEL classification

G12: Asset Pricing • Trading Volume • Bond Interest Rates C92: Laboratory, Group Behavior D83: Search • Learning • Information and Knowledge • Communication • Belief • Unawareness
Type
Original Paper
Information
Experimental Economics , Volume 20 , Issue 1 , March 2017 , pp. 156 - 180
Copyright
Copyright © 2016 Economic Science Association

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Footnotes

Electronic supplementary material The online version of this article (doi:https://doi.org/10.1007/s10683-016-9480-5) contains supplementary material, which is available to authorized users.

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