The Wisdom of the Crowd in Dynamic Economies

Dindo, Pietro and Massari, Filippo (2020) The Wisdom of the Crowd in Dynamic Economies. Theoretical Economics, 15 (4). pp. 1627-1668. ISSN 1933-6837

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Abstract

The wisdom of the crowd applied to financial markets asserts that prices represent a consensus belief that is more accurate than individual beliefs. However, a market selection argument implies that prices eventually reflect only the beliefs of the most accurate agent. In this paper, we show how to reconcile these alternative points of view. In markets in which agents naively learn from equilibrium prices, a dynamic wisdom of the crowd holds. Market participation increases agents' accuracy, and equilibrium prices are more accurate than the most accurate agent.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > School of Economics
Depositing User: LivePure Connector
Date Deposited: 22 Jul 2020 02:47
Last Modified: 04 Aug 2021 01:13
URI: https://ueaeprints.uea.ac.uk/id/eprint/76222
DOI: 10.3982/TE3924

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