Informational Economics

Informational economics studies how information affects economic decisions and market behavior. In experimental finance, researchers create controlled environments to test how people's choices change based on the information they have or lack. For instance, a study might examine how investors react to news about a company’s performance. By analyzing participants' decisions in these experiments, economists can understand the impact of information on things like stock prices, risk-taking, and market efficiency. This helps illuminate why markets behave the way they do and informs better decision-making for both individuals and institutions.