Y2K Bibliography of Experimental Economics and Social Science
Asymmetric Information

updated December 29, 1999
Charles A. Holt, cah2k@virginia.edu, suggestions and corrections welcome
(for online and personal use only)

Capra, C. Monica, Rosario Gomez, Jacob K. Goeree, and Charles A. Holt (2000) “Predation, Asymmetric Information, and Strategic Behavior in the Classroom: An Experimental Approach to the Teaching of Industrial Organization,” International Journal of Industrial Organization, 18:1 (January), 205-225. Keywords: experiments, classroom games, markets, predatory pricing, posted offer markets, entry, multiple markets. Abstract: This paper describes a classroom predatory pricing game, and surveys a series of other classroom games motivated by industrial organization issues. Email Contact: jg2n@virginia.edu

Cason, Timothy N. (1994) “The Strategic Value of Asymmetric Information Access for Cournot Competitors,” Information Economics and Policy, 6:1 (March), 3-24. Keywords: experiments, markets, Cournot, asymmetric information. Email Contact: cason@mgmt.purdue.edu

Cason, Timothy N. (1999) “The Opportunity for Conspiracy in Asset Markets Organized with Dealer Intermediaries,” Review of Financial Studies, forthcoming. Keywords: experiments, markets, asset markets, collusion, limit orders, asymmetric information, adverse selection, efficiency. Abstract: Traders in an asset market experiments place orders through dealers, who are able to reduce informational efficiency and widen spreads when they are able to collude between periods. Allowing traders to post limit orders tends to restore efficiency and narrow spreads, even when dealers collude. Email Contact: cason@mgmt.purdue.edu

Chadhuri, A. (1998) “The Ratchet Principle in a Principal Agent Game with Unknown Costs: An Experimental Analysis,” Journal of Economic Behavior and Organization, 37:3 (November), 291-304. Keywords: experiments, game theory, principal agent model, asymmetric information, ratchet principle. Abstract: This paper reports data for a repeated principal agent game in which the principal does not know the agent's effort cost and may use observed high efforts to ratchet up standards in later rounds. There is little ratcheting observed, as agents tend to play naively.

Cooper, David J., John H. Kagel, Wei Lo, and Qing Liang Gu (1999) “Gaming Against Managers in Incentive Systems: Experimental Results with Chinese Students and Chinese Managers,” American Economic Review, 89:4 (September), 781-804. Keywords: experiments, game theory, signalling games, strategic behavior, subject pool effects, incentive effects, context effects, methodology. Abstract: Students and managers in China are used as subjects in strategic incentive games with asymmetric information, under varying incentive and context conditions. Play converges only incompletely to a pooling equilibrium, although large increases in financial incentives produce more strategic play. Email Contact: djc13@guinness.som.cwru.edu

Copeland, Thomas E., and Daniel Friedman (1991) “Partial Revelation of Information in Experimental Asset Markets,” The Journal of Finance, 46:1 (March), 265-295*. Keywords: experiments, markets, asset markets, asymmetric information. Email Contact: dan@cats.ucsc.edu

Dasgupta, S., and K. C. Williams (1995) “Search Behavior of Asymmetrically Informed Voters: An Experimental Study,” Economics and Politics, 7:1 (March), 21-41. Keywords: experiments, public, voting, asymmetric information.

DeJong, Douglas V., Robert Forsythe, and Russell Lundholm (1985) “Ripoffs, Lemons, and Reputation Formation in Agency Relationships: A Laboratory Market Study,” Journal of Finance, 40(July), 809-823. Keywords: experiments, information, markets, posted offer, quality, asymmetric information, lemons markets. Email Contact: dejong@blue.weeg.uiowa.edu

Dopuch, Nicholas, Ronald R. King, and David E. Wallin (1989) “The Use of Experimental Markets in Auditing Research: Some Initial Findings,” Auditing: A Journal of Practice & Theory, 8:Supp. 98-127. Keywords: experiments, information, disclosure, asset markets, asymmetric information. Abstract: Seller verification and buyer report mechanisms tend to increase efficiency in laboratory markets with asymmetric information.

Forsythe, Robert, John Kennan, and Barry Sopher (1991) “An Experimental Analysis of Strikes in Bargaining Games with One-Sided Private Information,” American Economic Review, 81:1 (March), 253-278. Keywords: experiments, bargaining, strikes, asymmetric information. Email Contact: robert_forsythe@uiowa.edu

Goeree, Jacob K., and Rosario Gomez (1999) “Predatory Pricing in the Laboratory,” University of Virginia, Discussion Paper, presented at the Spring 1999 Public Choice Meetings. Keywords: experiments, markets, predatory pricing, entry, multiple markets, asymmetric information. Abstract: Predatory pricing is observed in some market experiments with asymmetric information and in which entry and exit decisions are made prior to price choices. Email Contact: jg2n@virginia.edu

Holt, Charles A. (1995) “Industrial Organization: A Survey of Laboratory Results,” in Handbook of Experimental Economics, edited by J. Kagel and A. Roth, Princeton, N.J.: Princeton University Press, 349-443. Keywords: experiments, markets, industrial organization, Cournot, double auction, posted offer auction, quality, market power, asymmetric information, survey. Abstract This paper surveys the large literature on industrial organization experiments. Email Contact: holt@virginia.edu

Holt, Charles A., and Roger Sherman (1986) “Quality Uncertainty and Bundling,” in Empirical Approaches to Consumer Protection Economics, edited by P. M. Ippolito and D. T. Scheffman, Washington, D.C.: Bureau of Economics, Federal Trade Association, 221-250. Keywords: experiments, markets, asymmetric information, bundling, quality. Abstract This paper investigates the performance of laboratory markets in which sellers can sell units in bundles. Email Contact: holt@virginia.edu

Holt, Charles A., and Roger Sherman (1990) “Advertising and Product Quality in Posted-Offer Experiments,” Economic Inquiry, 28:3 (January), 39-56. Keywords: experiments, markets, asymmetric information, lemons markets, quality, advertising. Abstract: The experimental markets with asymmetric information allow an analysis of professional association rules that prohibit price and or quality advertising. Email Contact: holt@virginia.edu

Holt, Charles A., and Roger Sherman (1994) “The Loser's Curse,” American Economic Review, 84:3 642-652. Keywords: experiments, information, winner's curse, loser's curse, naive bidding, auctions, bargaining, asymmetric information. Abstract: In bilateral bargaining with asymmetric information, the uninformed agent bids too high and loses money in the winner's curse treatment and bids too low in the loser's curse treatment. The winner's curse is due to a failure to realize that an accepted bid puts an upper bound on the seller's value, and the loser's curse is due to a failure to realize that in increase in one's bid picks up relatively high-value items at the margin. Email Contact: holt@virginia.edu

Holt, Charles A., and Roger Sherman (1999) “Classroom Games: A. Market for Lemons,” Journal of Economic Perspectives, 13:1 (Winter), 205-214. Keywords: experiments, classroom games, information, asymmetric information, lemons markets, quality. Abstract: The classroom game described here puts students in the roles of buyers and sellers in a market with asymmetric information about product quality, which is selected by sellers. Qualities typically fall to inefficiently low levels, which can serve as a platform for the discussion of institutions that arise to deal with "lemon's effects." Email Contact: holt@virginia.edu

Hurley, Terrance M., and Jason F. Shogren (1998) “Asymmetric Information Contests,” European Journal of Political Economy, 14:4 (November), 645-665. Keywords: experiments, game theory, contests, asymmetric information. Email Contact: tmhurley@iastate.edu

Kagel, John H., Chung Kim, and Donald Moser (1996) “Fairness in Ultimatum Games with Asymmetric Information and Asymmetric Payoffs*,” Games and Economic Behavior, 13:1 (March), 100-110. Keywords: experiments, bargaining, asymmetric information, asymmetric payoffs, fairness. Email Contact: kagel+@pitt.edu

Kennan, John, and Robert Wilson (1993) “Bargaining with Private Information,” Journal of Economic Literature, 31:1 (March), 45-104. Keywords: experiments, bargaining, private information, asymmetric information, survey.

King, Ronald R., and David E. Wallin (1991) “Voluntary Disclosures When Seller's Level of Information is Unknown,” Journal of Accounting Research, 29:1 (Spring), 96-108. Keywords: experiments, information, markets, disclosure, asymmetric information. Abstract: The paper reports market experiments in which buyers did not know whether or not sellers were informed, and sellers could voluntarily disclose information. Results are qualitatively consistent with theoretical predictions that sellers will not fully disclose information in this environment. Deviations from point predictions of the theory are discussed.

King, Ronald R., and David E. Wallin (***) “Market-Induced Information Disclosures: An Experimental Markets Investigation,” Contemporary Accounting Research, 8:1 170-197. Keywords: experiments, information, disclosure, unraveling effect, asymmetric information. Abstract: The experiments test the theoretical "unraveling" proposition that sellers with private information will fully disclose private information about their products, due to adverse inferences that buyers will draw from non-disclosure. The outcomes converge towards full disclosure when buyers know the range of seller disclosure options and then the number of such options is large.

King, Ronald R., and David E. Wallin (***) “The Effects of Antifraud Rules and Ex Post Verifiability on Managerial Disclosures,” Contemporary Accounting Research, 6:2 859-892. Keywords: experiments, information, disclosure, unraveling effect, asymmetric information.

Lamoureux, C, and C. Schnitzlein (1997) “Herd Through the Grapevine: Winner's Curse in a Fragmented Asset Market,” University of Arizona, Discussion Paper. Keywords: experiments, markets, asset markets, dealer intermediation, off floor search, losses, experience. Abstract: In an asset market experiment with asymmetric information and competing dealers, a rule that allows traders to search "off floor" causes dealer bid-ask spreads to tighten, with the effect that dealer profits are reduced. These losses persist even after dealers have obtained considerable experience. Comparisons with the winner's curse are discussed.

Lynch, Michael, Ross M. Miller, Charles R. Plott, and Russell Porter (1986) “Product Quality, Consumer Information and 'Lemons' in Experimental Markets,” in Empirical Approaches to Consumer Protection Economics, edited by P.M. Ippolito and D.T. Scheffman, Washington, D.C.: Federal Trade Commission, Bureau of Economics, 251-306. Keywords: experiments, markets, information, quality, asymmetric information, lemons markets. Email

Marks, Melanie B., and Rachel T. A. Croson (1999) “The Effect of Incomplete Information in a Threshold Public Good Experiment,” Public Choice, 99:1-2 (April), 103-118. Keywords: experiments, public, voluntary contributions, threshold public good, step-level public good, incomplete information, asymmetric information. Abstract: This experiment is designed to determine the effect of asymmetric information on contributions to a step-level public good. Email Contact: mmarks@longwood.lwc.edu

Oosterbeek, Hessel, Hester Sloof, and Joep Sonnemans (1999) “Up-or-Out Contracts and the Promise of Promotions: An Experiment,” University of Amsterdam, Discussion Paper, presented at the Summer 1999 ESA Meeting. Keywords: experiments, information, game theory, asymmetric information, up-or-out contracts, promotion, labor economics, reciprocity. Email Contact: sloof@fee.uva.nl

Peterson, Steven P. (1996) “Some Experimental Evidence on the Efficiency of Dividend Signaling in Resolving Information Asymmetries,” Journal of Economic Behavior and Organization, 29:3 (May), 373-388. Keywords: experiments, markets, asset markets, dividend signaling, asymmetric information.

Plott, Charles R., and Louis L. Wilde (1982) “Professional Diagnosis vs. Self-Diagnosis: An Experimental Examination of Some Special Features of Markets with Uncertainty,” in Research in Experimental Economics, Vol 2, edited by V. L. Smith, Greenwich, Conn.: JAI Press, 63-112. Keywords: experiments, markets, information, quality, asymmetric information. Email Contact: cplott@hss.caltech.edu

Posey, Lisa I., and Abdullah Yavas (1999) “Screening Equilibria in Experimental Markets,” Pennsylvania State University, Discussion Paper, presented at the Summer 1999 ESA Meeting. Keywords: experiments, information, screening, asymmetric information, insurance. Email Contact: ayavas@psu.edu

Potters, Jan, and Frans van Winden (1992) “Lobbying and Asymmetric Information,” Public Choice, 74:3 (October), 269-292. Keywords: experiments, game theory, public, lobbying, asymmetric information. Email Contact: j.j.m.potters@kub.nl

Rapoport, Amnon, and James A. Sundali (1996) “Ultimatums in Two-Person Bargaining with One-Sided Uncertainty: Offer Games,” International Journal of Game Theory, 25:4 475-494. Keywords: experiments, bargaining, asymmetric information, offer games. Email Contact: arapoport@bpa.arizona.edu

Rapoport, Amnon, James A. Sundali, and Darryl A. Seale (1996) “Ultimatums in Two-Person Bargaining with One-Sided Uncertainty: Demand Games,” Journal of Economic Behavior and Organization, 10:2 171-201**. Keywords: experiments, bargaining, asymmetric information, demand games. Email Contact: arapoport@bpa.arizona.edu

Reynolds, Stanley S. (1999) “Sequential Bargaining with Asymmetric Information: The Role of Quantal Response Equilibrium in Explaining Experimental Results,” University of Arizona, Discussion Paper, presented at the Summer 1999 ESA Meetings. Keywords: experiments, bargaining, sequential bargaining, asymmetric information, quantal response equilibrium, logit equilibrium, Nash equilibrium, bounded rationality. Email Contact: sreynolds@bpa.arizona.edu

Sadiraj, Klarita, and Arthur Schram (1998) “Informed and Uninformed Investors in an Experimental Ponzi Scheme,” University of Amsterdam, Discussion Paper, presented at the Fall 1998 ESA Meetings. Keywords: experiments, game theory, asymmetric information, ponzi schemes.

Sadiraj, Klarita, Arthur Schram, and Sweder van Wijnbergen (1999) “Rational Behavior Versus Herd Behavior: Theoretical and Experimental Analysis,” University of Amsterdam, Discussion Paper, presented at the Fall 1999 European Regional ESA Meeting. Keywords: experiments, information, ponzi scheme, herd behavior, asymmetric information. Abstract: The ponzi scheme setup has two types of players; the informed players have information that enables them to decide when to withdraw their investment. In the experiments, the uninformed react to the choices of the informed in a kind of herd-like behavior.

Samuelson, William (1984) “Bargaining under Asymmetric Information,” Econometrica, 52:4 995-1005. Keywords: experiments, bargaining, asymmetric information.

Samuelson, William, and Max H. Bazerman (1985) “The Winner's Curse in Bilateral Negotiations,” in Research in Experimental Economics, Vol. 3, edited by V. L. Smith, Greenwich, Conn.: JAI Press, 105-137. Keywords: experiments, bargaining, asymmetric information, winner's curse. Email Contact: mbazer@nwu.edu

Schnitzlein, C. (1996) “Call and Continuous Trading Mechanisms under Asymmetric Information: An Experimental Investigation,” Journal of Finance, 51:613-636 . Keywords: experiments, markets, asset markets, call markets, double auctions, asymmetric information.

Søberg, Morten (1999) “Asymmetric Information and International Tradable Quota Treaties: An Experimental Evaluation,” Statistics Norway, Discussion Paper, presented at the Summer 1999 ESA Meeting. Keywords: experiments, markets, tradable emissions permits, international, environmental economics. Email Contact: morten.soberg@ssb.no

Watts, Susan (1992) “Private Information, Prices, Asset Allocation, and Profits: Further Experimental Evidence,” in Research in Experimental Economics, Vol. 5, edited by R. M. Isaac, Greenwich, Conn.: JAI Press, 81-117. Keywords: experiments, markets, asset markets, asymmetric information, rational expectations equilibrium, insider information. Abstract This paper reports on asset market experiments in which a random device determined whether or not some traders would receive inside information, and the uninformed traders did not know whether or not others were informed. The results were somewhat supportive of the rational expectations predictions, but insiders made higher profits and convergence was more erratic than when insider information was common knowledge. One price bubble and some convergence failures were observed. Email Contact: swatts@memt.purdue.edu