Prediction Markets / Justin Wolfers, Eric Zitzewitz.

Format:

Book

Author/Creator:

Wolfers, Justin.

Contributor:

National Bureau of Economic Research.

Zitzewitz, Eric.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10504.

NBER working paper series no. w10504

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

We analyze the extent to which simple markets can be used to aggregate disperse information into efficient forecasts of uncertain future events. Drawing together data from a range of prediction contexts, we show that market-generated forecasts are typically fairly accurate, and that they outperform most moderately sophisticated benchmarks. Carefully designed contracts can yield insight into the market's expectations about probabilities, means and medians, and also uncertainty about these parameters. Moreover, conditional markets can effectively reveal the market's beliefs about regression coefficients, although we still have the usual problem of disentangling correlation from causation. We discuss a number of market design issues and highlight domains in which prediction markets are most likely to be useful.

Notes:

Print version record

May 2004.