Ryan Oprea will host our next Thursday Tech Talk (T3) by re-enacting a classic economics experiment that demonstrates that markets can aggregate decentralized information. He’s a visiting intern from George Mason University whose advisor, Vernon Smith, first devised this classroom experiment and is widely credited for inspiring the entire field of experimental econmics (for which he won the Nobel Prize in 2002).
Traditionally, economists assumed that all traders had to know the entire supply and demand curve to agree to trade at the equilibrium price. In effect, you can carve that graph into puzzle pieces and hand each participant a single piece, yet within a few rounds of trading, the market converges on the correct answer.
Ryan will run this experiment and lead a discussion on how variations of this experiment are still considered exciting research challenges to this day.