Download or read book Information Aggregation Under Ambiguity written by Spyros Galanis and published by . This book was released on 2019 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study information aggregation in a dynamic trading model with partially informed and ambiguity averse traders. We show theoretically that separable securities, introduced by Ostrovsky (2012) in the context of Subjective Expected Utility, no longer aggregate information if some traders have imprecise beliefs and are ambiguity averse. Moreover, these securities are prone to manipulation, as the degree of information aggregation can be influenced by the initial price, set by the uninformed market maker. These observations are also confirmed in our experiment, using prediction markets. We define a new class of strongly separable securities which are robust to the above con- siderations, and show that they characterize information aggregation in both strategic and non-strategic environments. We derive several theoretical predictions, which we are able to confirm in the lab.