Prediction Markets = Clear Expiry + Disperse Information + Participation Incentives
Chris F. Masse November 14th, 2007
Jed Christiansen at Forbes (just after John Delaney’s ill-written and pointless comment):
A market effectively aggregates the information from everyone participating. So anything where:
- there is a clear result
- information is dispersed between people and/or locations
- people have an incentive to participate in the market
will likely provide better results than any other forecasting method. Experts just aren’t as good as they (or anyone else) think they are. It’s simply better to ask the crowd in these cases.
Missing from Jed Christiansen’s comment is the emphasis on long series for comparison. Takes time and hundreds of prediction markets to prove the wisdom of crowds.
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UPDATE: Jed Christiansen comments…
Chris, I agree that for probability assessment, a number of measurements are required to assess success. However, for metrics (ie, sales of widget X, rating of product Y) it doesn’t require a long series at all. Depending on how poor the current forecasting model is performing, a prediction market could prove successful after just a few measurements.
Chris, I agree that for probability assessment, a number of measurements are required to assess success.
However, for metrics (ie, sales of widget X, rating of product Y) it doesn’t require a long series at all. Depending on how poor the current forecasting model is performing, a prediction market could prove successful after just a few measurements.