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Fuzzy relations for the analysis of traders' preferences in an information market game

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  • Van de Walle, Bartel
  • Turoff, Murray

Abstract

In this paper we focus on preference and decision data gathered during a computer-supported information market game in which 35 students participated during seven consecutive trading sessions. The participants' individual preferences on the market shares are collected to calculate a collective preference ranking using the Borda social choice method. Comparing this preference ranking to the shares' actual market ranking resulting from the participants' trading, we find a statistically significant difference between both rankings. As the preferences established by market behavior cannot be adequately explained through a social choice rule, we propose an alternative explanation based on the herd behavior phenomenon where traders imitate the most successful trader in the market. Using a decision analysis technique based on fuzzy relations, we study the participants' rankings of the best share in the market during 7 weeks and compare the most successful trader to the other traders. The results from our analysis show that a substantial number of traders is indeed following the market leader.

Suggested Citation

  • Van de Walle, Bartel & Turoff, Murray, 2009. "Fuzzy relations for the analysis of traders' preferences in an information market game," European Journal of Operational Research, Elsevier, vol. 195(3), pages 905-913, June.
    • Handle: RePEc:eee:ejores:v:195:y:2009:i:3:p:905-913
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    References listed on IDEAS

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    1. Friedman,Daniel & Sunder,Shyam, 1994. "Experimental Methods," Cambridge Books, Cambridge University Press, number 9780521456821, September.
    2. Bartel Van de Walle & Bernard De Baets & Etienne Kerre, 1998. "Characterizable fuzzy preference structures," Annals of Operations Research, Springer, vol. 80(0), pages 105-136, January.
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    4. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(3), pages 797-817.
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    9. Charles A. Holt, 1996. "Classroom Games: Trading in a Pit Market," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 193-203, Winter.
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