Comparing laboratory experiments and agent-based simulations: The value of information and market efficiency in a market with asymmetric information

Abstract

In this paper agent-based simulations are employed to deepen our understanding of results from experimental asset markets with asymmetric fundamental information. Beside the experimental treatment, we implement two simulation settings: a base-case simulation with all agents using their fundamental information and an equilibrium solution in which agents can choose from a set of three different strategies. We find that the behavior of the human subjects closely matches a strategy based on using the fundamental information provided, even when other strategies would have resulted in higher earnings. As a consequence, efficiency in the human markets is lower than in most of the simulated markets. © Springer-Verlag Berlin Heidelberg 2009.