Difference between revisions of "Prediction market"

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Prediction markets speculative markets created for the purpose of making predictions. Assets are created whose final cash value is tied to a particular event (e.g., will the next US president be a Republican) or parameter (e.g., total sales next quarter). The current market prices can then be interpreted as predictions of the probability of the event or the expected value of the parameter. Prediction markets are thus structured as betting exchanges, without any risk for the bookmaker.
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Prediction markets are speculative markets created for the purpose of making predictions. Assets are created whose final cash value is tied to a particular event or parameter. The current market prices can then be interpreted as predictions of the probability of the event or the expected value of the parameter. Prediction markets are thus structured as betting exchanges, without any risk for the bookmaker. [[Robin Hanson]] has suggested many innovative additions to predictions markets such as conditional predictions.  
  
 
People who buy low and sell high are rewarded for improving the market prediction, while those who buy high and sell low are punished for degrading the market prediction. Evidence so far suggests that prediction markets are at least as accurate as other institutions predicting the same events with a similar pool of participants.
 
People who buy low and sell high are rewarded for improving the market prediction, while those who buy high and sell low are punished for degrading the market prediction. Evidence so far suggests that prediction markets are at least as accurate as other institutions predicting the same events with a similar pool of participants.
  
Predictions markets have been used by organizations such as Google, General Electric, and Microsoft; several online and commercial prediction markets are also in operation. Historically, prediction markets have often been used to predict election outcomes as well as polls.  
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Predictions markets have been used by organizations such as Google, General Electric, and Microsoft; several online and commercial prediction markets are also in operation. Historically, prediction markets have often been used to predict election outcomes.  
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==See also==
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*[[Prediction]]
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*[[Group rationality]]
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*[[Making beliefs pay rent]]
  
 
==Blog posts==
 
==Blog posts==
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*[http://www.overcomingbias.com/2006/11/first_known_bus.html A 1990 Corporate Prediction Market]  by [[Robin Hanson]]
 
*[http://www.overcomingbias.com/2006/11/first_known_bus.html A 1990 Corporate Prediction Market]  by [[Robin Hanson]]
 
*[http://www.overcomingbias.com/2006/12/leamers_1986_id.html Leamer's 1986 Idea Futures Proposal] by Robin Hanson
 
*[http://www.overcomingbias.com/2006/12/leamers_1986_id.html Leamer's 1986 Idea Futures Proposal] by Robin Hanson
*[http://www.overcomingbias.com/2006/12/does_profit_rat.html Does Profit Rate Insight Best?] by Robin Hanson
 
 
*[http://www.overcomingbias.com/2006/12/should_predicti.html Should Prediction Markets be Charities?] by Peter McCluskey
 
*[http://www.overcomingbias.com/2006/12/should_predicti.html Should Prediction Markets be Charities?] by Peter McCluskey
 
*[http://www.overcomingbias.com/2006/12/the_future_of_o_1.html The Future of Oil Prices 2: Option Probabilities] by [[Wikipedia:Hal Finney (cipherpunk)|Hal Finney]]
 
*[http://www.overcomingbias.com/2006/12/the_future_of_o_1.html The Future of Oil Prices 2: Option Probabilities] by [[Wikipedia:Hal Finney (cipherpunk)|Hal Finney]]
 
*[http://www.overcomingbias.com/2009/09/prediction-markets-as-collective-inteligence.html Prediction Markets As Collective Intelligence] by Robin Hanson
 
*[http://www.overcomingbias.com/2009/09/prediction-markets-as-collective-inteligence.html Prediction Markets As Collective Intelligence] by Robin Hanson
 
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*[http://www.overcomingbias.com/2011/11/conditional-close-election-markets.html Fixing Election Markets] by Robin Hanson
==See also==
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*[http://www.gwern.net/Prediction%20markets Prediction Markets] by gwern
 
 
*[[Prediction]]
 
*[[Group rationality]]
 
*[[Making beliefs pay rent]]
 
  
 
==External links==
 
==External links==

Revision as of 11:21, 14 July 2012

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Prediction markets are speculative markets created for the purpose of making predictions. Assets are created whose final cash value is tied to a particular event or parameter. The current market prices can then be interpreted as predictions of the probability of the event or the expected value of the parameter. Prediction markets are thus structured as betting exchanges, without any risk for the bookmaker. Robin Hanson has suggested many innovative additions to predictions markets such as conditional predictions.

People who buy low and sell high are rewarded for improving the market prediction, while those who buy high and sell low are punished for degrading the market prediction. Evidence so far suggests that prediction markets are at least as accurate as other institutions predicting the same events with a similar pool of participants.

Predictions markets have been used by organizations such as Google, General Electric, and Microsoft; several online and commercial prediction markets are also in operation. Historically, prediction markets have often been used to predict election outcomes.

See also

Blog posts

External links