The study reports on the ability of competing models of market information integration and dissemination to explain the behavior of simple laboratory markets for a one-period security. Returns to the security depended upon a randomly drawn state of nature. Some agents (insiders), whose identity was unknown to other agents, knew the state before the markets opened. With replication of market conditions the predictions of a fully revealing rational-expectations model are relatively accurate. Prices adjusted immediately to near rational-expectations prices; profits of insiders were virtually indistinguishable from noninsiders; and efficiency levels converged to near 100 percent.

This paper contains a generalization of the General Possibility Theorem to situations where choice over two-element (more generally, “small”) sets is not possible. The analysis is developed in terms of the social choice function formulation rather than the social welfare function approach. In this formulation, assumptions concerning the size of sets of feasible alternatives are explicit, allowing the role of these assumptions in inducing impossibility results to be explored.

The study reports on the applicability of competing models of market information integration and dissemination in explaining the behavior of simple laboratory, one-period security markets. Returns to the security depended upon a randomly chosen state of nature. Some agents (insiders), whose identity was unknown to other agents, knew the state before the markets opened. With replication of market conditions a model based upon rational expectations principles is relatively accurate. Prices adjusted immediately to near rational expectations prices; profits of insiders were virtually indistinguishable from noninsiders; and efficiency levels converged to near 100 percent.

The time path of asset prices is studied within a stationary experimental environment. After several replications prices converge to a perfect foresight equilibrium. A sequential market having an "informational trap" and a futures market are also studied.