The DOI matches its Crossref record; 8 of the 8 references it cites were found in a registry or an index.
Ethnic diversity deflates price bubbles
Open accessAbstract
Significance: Markets are central to modern society, so their failures can have devastating effects. Here, we examine a prominent failure: price bubbles. We propose that bubbles are affected by ethnic homogeneity in the market and can be thwarted by diversity. Using experimental markets in Southeast Asia and North America, we find a marked difference: Market prices fit true values 58% better in diverse markets. In homogenous markets, overpricing is higher and traders’ errors are more correlated than in diverse markets. The findings suggest that price bubbles arise not only from individual errors or financial conditions, but also from the social context of decision making. Informing public discussion, our findings suggest that diversity facilitates friction that enhances deliberation and upends conformity.
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Cites
Simmons, J. P., Nelson, L. D., & Simonsohn, U. (2011) · Psychological Science · doi:10.1177/0956797611417632 · Cited by 6,567
Maps of Bounded Rationality: Psychology for Behavioral Economics
Kahneman, D. (2003) · American Economic Review · doi:10.1257/000282803322655392 · Cited by 5,377
Putnam, R. D. (2007) · Scandinavian Political Studies · doi:10.1111/j.1467-9477.2007.00176.x · Cited by 4,027
Embeddedness and Immigration: Notes on the Social Determinants of Economic Action
Portes, A., & Sensenbrenner, J. (1993) · American Journal of Sociology · doi:10.1086/230191 · Cited by 3,493 · cited 1×
“” In other words, modern markets rely less on the mechanical solidarity engendered by coethnicity, the “bounded solidarity” (32) embodied for instance in the Maghribi traders’ coalition (33) or the rotating credit associations of Southeast Asia (34, 35).”
BackgroundHenrich, J., Heine, S. J., & Norenzayan, A. (2010) · Nature · doi:10.1038/466029a · Cited by 3,441
Groups of diverse problem solvers can outperform groups of high-ability problem solvers
Hong, L., & Page, S. E. (2004) · Proceedings of the National Academy of Sciences · doi:10.1073/pnas.0403723101 · Cited by 2,103
The Rotating Credit Association: A "Middle Rung" in Development
Geertz, C. (1962) · Economic Development and Cultural Change · doi:10.1086/449960 · Cited by 627
Raafat, R. M., Chater, N., & Frith, C. (2009) · Trends in Cognitive Sciences · doi:10.1016/j.tics.2009.08.002 · Cited by 479
Cited by
The preeminence of ethnic diversity in scientific collaboration
AlShebli, B. K., Rahwan, T., & Woon, W. L. (2018) · Nature Communications · doi:10.1038/s41467-018-07634-8 · Cited by 490
Jeong, S.-H., & Harrison, D. A. (2017) · Academy of Management Journal · doi:10.5465/amj.2014.0716 · Cited by 429
Diversity in the Economics Profession: A New Attack on an Old Problem
Bayer, A., & Rouse, C. E. (2016) · Journal of Economic Perspectives · doi:10.1257/jep.30.4.221 · Cited by 384
Systemic inequalities for LGBTQ professionals in STEM
Cech, E. A., & Waidzunas, T. J. (2021) · Science Advances · doi:10.1126/sciadv.abe0933 · Cited by 319
Portes, A. (2014) · Proceedings of the National Academy of Sciences · doi:10.1073/pnas.1421888112 · Cited by 278
Metadata
- Authors
- Levine, S. S., Apfelbaum, E. P., Bernard, M., Bartelt, V. L., Zajac, E. J., & Stark, D.
- Venue
- Proceedings of the National Academy of Sciences
- Published
- 2014-11-17
- Volume
- 111
- Issue
- 52
- Pages
- 18524-18529
- ISSN
- 0027-8424 (ISSN-L)
- 1091-6490
- OpenAlex
- W2160956610
- Cited by
- 252
- References
- 8
- FWCI
- 41.57
- Type
- journal article
- Language
- en
- Open access
- bronze
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