participants - 12th Edition Artificial Economics Rome 20th-21st September 2016

12th Artificial Economics Conference
co-located with Social Simulation Conference


Paper submission: April 18th 2016

Acceptance notification: June 6th 2016

Early registration: July 15th 2016


20th-21st September 2016

Biased Information, Peer Pressure and Expectation Formation

Dehua Shen, Andrea Teglio and Wei Zhang


The realization of efficient market relies on two assumptions: first, the information is diffused without distortions; second, investors are perfectly rational and therefore they can precisely interpret the received information and then react accordingly. Behavior economics has relaxed the assumption on perfect rationality and recognized the impact of psychological biases on the expectation formation. However, existing literature mainly postulates the unbiased information generated by information sources. In that sense, the information reporting behavior is hugely simplified. In this paper, we address this issue by simulating an agent-based computational model with the consideration of the diffusion of biased information and investigate its influence on expectation formation. Meanwhile, the peer pressure mechanism is introduced to depict the social learning behavior among investors. The preliminary results show that both the biased information and peer pressure have strong negative effects on expectation formation and decision-making.