We examine theoretically and experimentally two countervailing effects of industry concentration in common value auctions. Greater concentration of information among fewer bidders reduces competition but increases the precision of private estimates. We demonstrate that this generally leads to...

The efficient market hypothesis predicts that asset prices reflect all available information. Recent experimental work found the rational expectation model to outperform the prior information model in contingent claim markets when traders hold homogeneous values, despite the no trade...

In a seminal work, Plott and Sunder (1988) offer support for the rational expectations hypothesis and report evidence that markets with certain features aggregate dispersed information. However, their results are based on only a few observations and our attempt to replicate the key findings of...

This paper presents a laboratory experiment that directly tests the theoretical predictions of consumption choices under rational inattention. Subjects are asked to select consumption when income is random. They can optimally decide to reduce uncertainty about income by acquiring signals about...