Publication: Aggregation and dissemination of information in experimental asset markets in the presence of a manipulator
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2008-09
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Abstract
We study with the help of a laboratory experiment the conditions under which an
uninformed manipulator - a robot trader that unconditionally buys several shares of a
common value asset in the beginning of a trading period and unwinds this position later
on - is able to induce higher asset prices. We find that the average contract price is
significantly higher in the presence of the manipulator if, and only if, the asset takes the
lowest possible value and insiders have perfect information about the true value of the
asset. It is also evidenced that the robot trader makes trading gains; i.e., independently
on whether the informed traders have perfect or partial information, it earns always
more than the average trader. Finally, not only uninformed subjects suffer from the
presence of the robot trader, but also some of the imperfectly informed insiders have
lower payoffs once the robot trader is added as a market participant.
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Asset market, Experiment, Price manipulation, Rational expectations