The Wisdom of the Crowd in Dynamic Economies

Pietro Dindo, Filippo Massari

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)
8 Downloads (Pure)

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.
Original languageEnglish
Pages (from-to)1627-1668
Number of pages42
JournalTheoretical Economics
Volume15
Issue number4
Early online date20 Nov 2020
DOIs
Publication statusPublished - Nov 2020

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