Results for “prediction market”

326 found

"When you see a man with whiskers of that cut and the ‘Pink ‘un‘ protruding out of his pocket, you can always draw him by a bet," said he.  "I daresay that if I had put £100 down in front of him, that man would not have given me such complete information as was drawn from him by the idea that he was doing me on a wager.

That is from Adventure of the Blue Carbuncle and of course the link is added by yours truly.  The latest news from the prediction markets, by the way, is that the U.S. basketball team is given about a 75 percent chance of taking home the gold medal.

Here you will find regular updates on prediction markets, with the blog-like news function here.  You’ll see there that the CFTC is requesting public comments on how to regulate "event contracts."  The site is launched by these people.

I thank Chris F. Masse for the pointer.

At Bet2give, an online electronic prediction market, anyone can “bet”
real money on the outcome of these events but with a twist – the
“winnings” go to a charity of the person’s choice.

Here is the full article, and here is Bet2give.com.  One of the "problems" with prediction markets is that they are zero-sum investments and traders cannot on average hope to come out ahead.  So why trade?  If only people really "in the know" trade liquidity will be low.  If too many "betting for fun" fools trade, the prices don’t mean that much.  You might get the right mix of informed and uninformed but who knows?  So the idea of doing these in charitable form might make some sense.

According to the report, “Using Prediction Markets to Track Information Flows: Evidence From Google,”
which was presented Friday at the American Economic Association meeting
in New Orleans, the strongest correlation in betting was found among
people who sat very close to one another, trumping even friendship or
other close social ties.

This is tangible evidence, the authors
argue, that information is shared most easily and effectively among
office neighbors, even at an Internet company where instant messaging
and e-mail are generally preferred to face-to-face discussion.

It is an argument, the authors say, for giving greater importance to
“microgeography,” or how people interact in the workplace. The finding
that information moved fastest among people who were the closest
together is also an endorsement of the company’s “third rule for
managing knowledge workers: Pack Them In,” the authors say.

And Adam Smith is validated once again:

The other crucial finding of the report was that there was a
detectible “optimism bias” among Google employees. That is, results
that were good for the company tended to be overpriced, particularly
for “subjects under the control of Google employees, such as, would a
project be completed on time or would a particular office be opened.”

This
optimism was most evident among new employees, the report found, and it
was bound to show up on days when Google stock had climbed.

Here is the story.  Of course this is very important work.  Thanks to Chris Masse for the pointer.  Elsewhere in prediction markets land, InTrade has now started conditional prediction markets, which consider oil prices, interest rates, and U.S. troops in Iraq, conditional on who becomes President.

1. Wrap-up of an interesting conference run by Consensus Point (HT: Midas Oracle;  Disclosure: I’m an occasional advisor to Consensus Point).  Robin Hanson tells me that he is now (back to) bullish on prediction markets – he saw real evidence of real firms implementing prediction markets and taking them seriously.
   UPDATE: Another nice summary available here.
2. How to bet real money, in a country in which real money markets are illegal? www.bet2give.com allows you to bet your charitable donations against mine.  You win the bet?  My donations go to your charity.  I win the bet?  Your donations go to my preferred charity.  Brilliant.  Incentives, charitable donations, and legal protection – all good things.  A longer description here.  (HT: Emile Servan-Schreiber of NewsFutures)
3. The ’08 race at InTrade: Latest trading suggest Hillary is a strong favorite to win the Democratic nomination (66% chance).   The Republican primary is a true three horse race.  Most puzzling (to me): How is Obama only a 16% chance?  Some say he is really running for VP, but the markets suggest he is only a 27% chance to win the second spot on the ticket.  My tip: Buy Obama for Prez at 8%.

    [Full disclosure: I’m an occasional advisor to both Consensus Point and NewsFutures]

Mark Thoma points us to a new paper by Michael Greenstone that tries to evaluate the effect of the surge.  The news is not good.

This paper shows how data
from world financial markets can be used to shed light on the central question
of whether the Surge has increased or diminished the prospect of today’s Iraq
surviving into the future. In particular, I examine the price of Iraqi state
bonds, which the Iraqi government is currently servicing, on world financial
markets. After the Surge, there is a sharp decline in the price of those bonds,
relative to alternative bonds. The decline signaled a 40% increase in the
market’s expectation that Iraq will default. This finding suggests that to date
the Surge is failing to pave the way toward a stable Iraq and may in fact be
undermining it.

It’s amazing how far we have come since 2003 when Robin Hanson’s DARPA-funded Policy Analysis Market was ridiculed and canceled.

MidasOracle.org, run by Chris F. Masse, who is the comprehensive source of information on this topic.  I was holding off on the announcement, but since it is already on the Wiki for Econ blogs…

Here, and it includes a podcast by Robin Hanson, as well as a discussion of the growing use of prediction markets in private companies.  Thanks to Chris Masse for the pointer.

Last week in The New York Times (TimesSelect), Joseph Nocera quoted Robin Hanson as saying private businesses had not made a breakthrough with the use of idea futures.  It seems natural to let your employees bet on future business conditions, the success of product lines, or broader questions of corporate strategy.  Microsoft and Google and a few other companies have played with the idea, but it does not (yet?) seem to be taking off.  Why not?

1. Prediction markets threaten the hierarchical control of top managers.  It would become too obvious that most managers are idiots, unable to predict the future.

2. Prediction markets make a big chunk of the bettors into "losers."  Yet within a company morale is all-important.  Businesses proceed by soliciting feedback, and by reshaping their plans to pretend that everyone is on board and has an ego stake in the final outcome.  Prediction markets make this coordination more difficult.  Once people make bets, they start rooting for their bet to win and for the other bet to lose.  They move away from maximizing the value of the firm and develop an oppositional mentality vis-a-vis other employees.  Furthermore it is disruptive to have a running tally on who are the winners and losers each day.

3. No matter what they pretend, businesses are not much interested in forecasting many future variables.  Successful businesses find product markets they can control for long periods of time.  They do a few things really well, and let a surprisingly large number of tasks slide.

4. We already have implicit betting markets in the form of resource prices.  When the information contained in those prices is sufficiently important, institutions will be organized in terms of "markets," rather than "firms."  Or firms can look at resource prices in outside markets for the information they need.

5. Most employees have no rational basis on which to bet.  If someone knows the truth, but is otherwise locked out from credibly signaling that knowledge to management, something is wrong with the organization of the company.  The small prizes from corporate prediction markets won’t be enough to elicit that knowledge from him in any case.

6. The corporate beast is far more constrained than most outsiders imagine.  Interest groups must be courted, coordinated, and sometimes fought every step of the way.  When it comes to choice, there are fewer degrees of freedom than one might think.  The real question is not what to do, but rather having the will and effectiveness to do it.  A bit like international free trade, no?  Prediction markets don’t help much in this regard.

7. When reward systems are created, employees view them as a means to distribute further privileges to insiders and favorites.  Prediction markets would be viewed the same way and in fact this might be true.  Who else is going to win all those bets?  Do corporations really need more insider favoritism?

Your thoughts?  Here are five open questions about prediction markets.

Here is the new version of the paper, for $5.  Here are older versions of the paper.  Here is a summary of the five questions.  Of these five, I worry most about getting uninformed traders to participate in a game with zero-sum (at best, assuming no trading costs) pecuniary returns.  I doubt if idea futures will be the sexiest form of gambling for most people.  Insofar as traders look for fun, only the celebrity-obsessed and current events-obsessed will find idea futures more attractive than Las Vegas or Baden-Baden.  (That is why contracts on politicians and Michael Jackson have been so popular.)  If you are simply looking to earn money for the longer run, Wall Street, with its positive expected rates of return, offers better odds.  That being said, as the fixed costs of market creation fall, a relatively small number of traders may suffice to keep most of the important idea futures going.

Which prediction markets ("information futures") had the best year last year?  Worst?  Which contract performed the best or was the most interesting?  What was the best academic paper in the area?

Find the answers to these questions, and many others here.

Thanks to Robin Hanson for the pointer, I will note that Robin was named (deservingly) as person of the year in this area, even though he bet Saddam would not be captured.