Economic oracles: How markets reveal optimal solutions to complex problems

Authors: Hassan Andrabi, Peter Bossaerts, Konstantinos Ioannidis, Robert Woods, Nitin Yadan

Stage: Draft in preparation

Abstract: Conventional wisdom suggests that a precondition for innovation is sufficient incentive that the private benefits of innovation will justify the costs incurred by the inventor. Typically, this incentive is established through the acquisition of patents, which allow inventors to monopolise intellectual property for monetary gain. However, this restricts the circulation of new ideas and slows the pace of innovation. With an experiment, we test here the capacity of markets to overcome this shortcoming by incentivising individuals to collectively find solutions to a complex task that mirrors the complexity of producing innovations in the real world.

Funding: Society for Experimental Finance ($4,000)

Presented at: 2^nd Summer School in Cognitive Foundations of Decision-Making (Ghent, 2025), 2^nd Annual Conference of UK-based Behavioural and Experimental Economists (Sheffield, 2025), 15^th Annual Society for Experimental Finance Conference (Maastricht, 2025), Tepper School of Business Economics Seminar (Pittsburgh, 2025), 14^th Annual Society for Experimental Finance Conference (Stavanger, 2024)