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Parimutuel betting markets as information aggregation devices: experimental results

Plott, Charles R. and Wit, Jorgen and Yang, Winston C. (2003) Parimutuel betting markets as information aggregation devices: experimental results. Economic Theory, 22 (2). pp. 311-351. ISSN 0938-2259. doi:10.1007/s00199-002-0306-7.

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The demonstrated capacity of markets to aggregate information motivates research on alternative institutions designed to do the same task. This study inquires about forms of parimutuel betting systems. Measures of information aggregation for performance evaluation are introduced. Two environments are studied. The first poses a simpler aggregation problem that does the second. Information aggregation can be detected under both environments but the degree depends on the choice of baselines. The competitive equilibrium rational expectations model is clearly the best model in the simpler environment but, in the more complex environment, models based on private information alone are more accurate. Bluffing and waiting inhibit aggregation and time and experience are conjectured to lead to more rational expectations-like performance.

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Additional Information:© 2003 Springer-Verlag. Received: February 7, 2001; revised version: May 10, 2002. The financial support of the California Institute of Technology Laboratory for Experimental Economics and Political Science and of the National Science Foundation is greatly appreciated. We wish to thank Colin Camerer, David Grether, and Markus Nöth for their comments and insights at the early stages of this research. In addition, we wish to acknowledge the many useful comments provided by the seminar on experimental economics at Caltech and by Thierry Foucault. We also thank Ralph Miles for correcting an error regarding parimutuel terminology and John Patty for his comments on the manuscript.
Group:Social Science Working Papers
Funding AgencyGrant Number
Caltech Laboratory for Experimental Economics and Political ScienceUNSPECIFIED
Subject Keywords:general laboratory, individual and group behavior, information and uncertainty, asymmetric and private information
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Other Numbering System NameOther Numbering System ID
Social Science Working Paper986
Issue or Number:2
Classification Code:JEL: C90, C91, C92, D8, D40, D82
Record Number:CaltechAUTHORS:20140220-141145310
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:43912
Deposited On:20 Feb 2014 22:56
Last Modified:10 Nov 2021 16:45

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