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JuliaS-FirstPaper 12 - 12 Feb 2008 - Main.JuliaS
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A Speculative Inquest | | | Introduction
What are prediction markets? | |
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< | Prediction markets are essentially an aggregation of betting exchanges for contingent future events. On sites like InTrade and NewsFutures speculators are invited to bet on - or, technically, to trade contracts in the market for - scores of different socio-political events; from when China will attack Taiwan, to which Supreme Court Justice will be the next to retire, to whether NASA's next shuttle will rove rather than its last. Speculators may buy and sell their contracts at any time, and the market prices - which represent the expected probability of the event - will rise and fall until the contingency occurs, at which point the price will either drop to zero or rise to one hundred and the market will expire. They work like conventional stock markets, except they trade in predictions instead of assets. | >
> | Prediction markets are essentially an aggregation of betting exchanges for contingent future events. On sites like InTrade and NewsFutures speculators are invited to trade contracts in the markets for scores of different socio-political events; from when China will attack Taiwan, to which Supreme Court Justice will be the next to retire, to whether NASA's next shuttle will rove father than its last. Speculators may buy and sell their contracts at any time, and the market prices - which represent the expected probability of the event - will rise and fall until the contingency occurs, at which point the price will either drop to zero or rise to one hundred and the market will expire. They work like conventional stock markets, except they trade in predictions instead of assets. | | | What are they used for? | |
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Forecasting, decision-making, risk management
What is information aggregation? | >
> | Though the idea of such markets is relatively simple, in reality they have staggering implications. As we will explore below, the markets incentivize people to invest based on their very best understanding of the future. By aggregating all this information, the market reflects the wisdom of the masses - wisdom which is proving to be remarkably reliable. Markets for the prediction of controllable social events encourage insiders to trade their information, enabling market analysts to foresee threats and risks. Prediction markets for the behaviors of financial markets offer speculators a potential means of hedging their losses when primary markets fail. Prediction markets for events that are communally controlled - like elections and economic activity - actually have the potential to make themselves come true. Some theorists even believe that prediction markets might be used for decision-making, by creating conditional markets which relate events with other variables. | | |
Prediction Markets and Judicial Decisions |
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| Revision 12 | r12 - 12 Feb 2008 - 02:11:41 - JuliaS |
| Revision 11 | r11 - 12 Feb 2008 - 00:32:22 - JuliaS |
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All material marked as authored by Eben Moglen is available under the license terms CC-BY-SA version 4.
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