Ethnic diversity deflates price bubbles
- 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.
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| Author: | Sheen S. Levine, Evan P. Apfelbaum, Mark Bernard, Valerie L. Bartelt, Edward J. Zajac, David Stark |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-373798 |
| DOI: | https://doi.org/10.1073/pnas.1407301111 |
| ISSN: | 0027-8424 |
| Pubmed Id: | https://pubmed.ncbi.nlm.nih.gov/25404313 |
| Parent Title (English): | Proceedings of the National Academy of Sciences of the United States of America |
| Publisher: | NAS |
| Place of publication: | Washington, DC |
| Document Type: | Article |
| Language: | English |
| Date of Publication (online): | 2014/11/17 |
| Date of first Publication: | 2014/11/17 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2015/04/24 |
| Tag: | decision making; diversity; economics; markets; psychology; sociology |
| Volume: | 111 |
| Issue: | 52 |
| Page Number: | 6 |
| First Page: | 18524 |
| Last Page: | 18529 |
| Note: | Freely available online through the PNAS open access option. |
| HeBIS-PPN: | 369170164 |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
