Two projects on learning from markets: bank runs and climate change predictions

Abstract

Market prices can convey information to users about an asset. This information can be used to make decisions. These decisions might then influence the value of the asset. For instance, consumers may be weary to make purchases on made.com if they hear that the stock price has dropped. This can lead to further drops in the price. In the first half of the talk, we demonstrate how this can indeed happen in a lab experiment based upon the Diamond Dybvig (1983) model (whose authors were recently awarded the Nobel Prize for it). In the second half of the talk, we introduce prediction markets and how they can be used to provide climate change predictions via CRUCIAL. The design is robust to such circularity present in the first part of the talk and should create an innovative method to fund research on climate change.