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Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | Coordination in the presence of asset markets |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Journal Title | American Economic Review |
| Publisher | UNSPECIFIED |
| Geographical Reach | international |
| ISSN | 0002-8282 |
| Volume | 101 |
| Number | 2 |
| Page Range | 927 - 947 |
| Date | 2011 |
| Abstract Text | We explore the relationship between outcomes in a coordination game and a pre-play asset market where asset values are determined by outcomes in the subsequent coordination game. Across two experiments, we vary the payoffs from the market relative to the game, the degree of interdependence in the game, and whether traders' asset payoffs are dependent on outcomes in their own or another game. Markets lead to significantly lower efficiency across treatments, even when they produce no distortion of incentives in the game. Market prices forecast game outcomes. Our experiments shed light on how financial markets may influence affiliated economic outcomes. |
| Digital Object Identifier | 10.1257/aer.101.2.927 |
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