Predictions of the noisy rational expectations equilibrium (REE) model are found to be relatively accurate for both asset and information markets in the laboratory. When information about an asset's uncertain dividend is sold to a fixed number of highest bidders, prices, allocations, efficiency, and distribution of profit predictions of the full revelation REE model in the asset market dominate the predictions of the Walrasian model; demand for information shifts to the left and its price declines close to zero. When the price of information is fixed at a relatively high level, the number of informed agents and the informativeness of the asset market tends to adjust to permit the informed agents to recover their investment in information.

The authors design and study an OLG experimental economy where the government finances a fixed real deficit through seigniorage. The economy has continua of nonstationary rational expectations equilibria and two stationary rational expectations equilibria. The authors do not observe nonstationary rational expectations paths. Observed paths tend to converge close to, or somewhat below, the low inflation stationary state. The adaptive learning hypothesis is consistent with the data in selecting the low inflation stationary state rational expectations equilibrium as a long-run stationary equilibrium. Nevertheless, simple adaptive learning models do not capture the market uncertainty or the biases observed in the data.

The idea that markets might aggregate and disseminate information and also resolve conflicts is central to the literature on decentralization (Hurwicz, 1972) and rational expectations (Lucas, 1972). We report on three series of experiments all of which were predicted to have performed identically by the theory of rational expectations. In two of the three series (one in which participants trade a complete set of Arrow-Debreu securities and a second in which all participants have identical preferences), double auction trading leads to efficient aggregation of diverse information and rational expectations equilibrium. Failure of the third series to exhibit such convergence demonstrates the importance of market institutions and trading instruments in achievement of equilibrium.