TY  - JOUR
A1  - Levine, Sheen S.
A1  - Apfelbaum, Evan P.
A1  - Bernard, Mark
A1  - Bartelt, Valerie L.
A1  - Zajac, Edward J.
A1  - Stark, David
T1  - Ethnic diversity deflates price bubbles
T2  - Proceedings of the National Academy of Sciences of the United States of America
N2  - Markets are central to modern society, so their failures can have devastating effects. Here, we examine a prominent failure: price bubbles. We propose that bubbles are affected by ethnic homogeneity in the market and can be thwarted by diversity. Using experimental markets in Southeast Asia and North America, we find a marked difference: Market prices fit true values 58% better in diverse markets. In homogenous markets, overpricing is higher and traders’ errors are more correlated than in diverse markets. The findings suggest that price bubbles arise not only from individual errors or financial conditions, but also from the social context of decision making. Informing public discussion, our findings suggest that diversity facilitates friction that enhances deliberation and upends conformity.
KW  - diversity
KW  - decision making
KW  - markets
KW  - sociology
KW  - economics
KW  - psychology
Y1  - 2014
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/37379
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-373798
SN  - 0027-8424
N1  - Freely available online through the PNAS open access option.
VL  - 111
IS  - 52
SP  - 18524
EP  - 18529
PB  - NAS
CY  - Washington, DC
ER  -