THIS IS NOT FAIR. Why would some “senior economists” cite one economist and not the other one, if they both co-authored any ground-breaking papers on prediction markets?? Makes no sense at all.
[...] a whole academic literature has emerged in this area [= prediction markets and betting exchanges], spearheaded by Justin Wolfers.
Unfair.
The missing bit is, of course, Eric Zitzewitz. If you have just surfaced from an Afghan cave, here’s what Eric Zitzewitz wrote just before going at the Yahoo! Confab:
We use a method we call a Prediction Market Event Study — which takes advantage of a prediction market tracking the probability of the event in question. Prediction markets help solve some of the traditional problems with event studies (calibrating the extent to which the event was a surprise, identifying the event window, controlling for other information released). Also, especially when we get big swings in probabilities in short time windows like we did in 2004 and 2006, they allow for much more precise estimates than the traditional method.
In my view, Eric Zitzewitz‘s work is more promising for the prediction market industry (providing that TradeSports-InTrade does not file bankruptcy due to the assaults of the US government) than Robin Hanson’s conference spamming on decision markets, an idea that may not have any applications.
