Informational Price Cascades And Non-Aggregation Of Asymmetric Information In Experimental Asset Markets

The authors report on experimental markets for a contingent claim asset that eight subjects traded for nine periods before the state was revealed. There is an informative binary signal that arrives after each of the first eight trading rounds. In the baseline treatment the realization of the signal is public information, and in another treatment, market participants are randomly sequenced and receive the signal as private information. In the latter case, they observe zero information aggregation and prices lock in on home grown norms, which they call informational price cascades.