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Using prediction markets to support IT project management
This entry was posted in Cases, Exchanges & Markets and tagged project management, Via AS. Bookmark the permalink.
3 Responses to Using prediction markets to support IT project management
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Should parties involved in project tasks be barred from taking positions that would profit from the project coming in late or over budget? (My vote is yes).
If so, how would this be enforced?
But if you impose that kind of rule, then the folks best able to know that a project will be late and over budget would be prevented from trading directly on that information.
.
As long as the rewards from delivering a project on time and within the budget are larger than the gains possible in the enterprise prediction market, an employee’s performance incentives should not be undermined by trading profits.
Ottaviani and Sorensen came out with a seldom-discussed paper over a year ago on this subject where they argue that corporate prediction markets will encourage outcome manipulation:
http://www.eea-esem.com/files/papers/EEA-ESEM/2006/409/fcpm.pdf
Probably the reason it is not discussed much is the fact that companies want "manipulation" towards the more optimistic outcomes, while the relatively small rewards of the market with respect to normal compensation incentives will not produce a meaningful amount of manipulation towards pessimistic outcomes. This is especially true where employees get performance bonuses, although in that case one strategy might be to manipulate prices for your own department lower, and others higher in order to create the impression of relative outperformance vs. expectations. This is price manipulation though, not outcome manipulation.