Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Nov, 1990, Volume 58, Issue 6

Public and Private Information: An Experimental Study of Information Pooling<1321:PAPIAE>2.0.CO;2-P
p. 1321-1339

Richard D. McKelvey, Talbot Page

This paper reports on an experimental study of the way in which individuals make inferences from publicly available information. We compare the predictions of a theoretical model of a common knowledge inference process with actual behavior. In the theoretical model, "perfect Bayesians," starting with private information, take actions; an aggregate statistic is made publicly available; the individuals do optimal Bayesian updating and take new actions; and the process continues until there is a common knowledge equilibrium with complete information pooling. We find that the theoretical model roughly predicts the observed behavior, but the actual inference process is clearly less efficient than the standard of the theoretical model, and while there is some pooling, it is incomplete.

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