Refine
Year of publication
- 2014 (2) (remove)
Language
- English (2)
Has Fulltext
- yes (2)
Is part of the Bibliography
- no (2)
Keywords
- psychology (2) (remove)
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.
“WAR IS PEACE, FREEDOM IS SLAVERY, AND IGNORANCE IS STRENGTH”. The slogan from George Orwell’s “1984” dystopia appears to capture the state of Russia’s 2014 official discourse quite accurately. This has not gone unnoticed by public and academic spectators in and outside Russia: while Bild magazine is counting Putin’s lies in his recent ARD interview, a Zeit article declares Russia itself to be a post-modern “lie”...