Experimental evidence has consistently confirmed the ability of uninformed traders, even novices, to infer information from the trading process. We hypothesized that ToM was involved after contrasting brain activation in subjects watching markets with and without insiders. ToM refers to the...

Two theoretical literatures, one using Bayesian Nash equilibrium, and the other using noisy rational expectations equilibrium, both provide a foundation for understanding how private information is impounded into asset prices, yet some of their predictions are conflicting. Here, we compare for...

This study tests the rationality of the decisions to purchase information, the informational efficiency of prices, and the optimality of the resulting allocations with a series of laboratory experiments in decentralized markets. The theory predicts that markets with dispersed information and...