A highly accurate prediction market has little value if other mechanisms can provide similar accuracy at a lower cost, or if few substantial decisions are influenced by accurate forecasts on its topic.

Robin Hanson – Overcoming Bias -

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Robin Hanson at LinkedIn

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Robin Hanson:

Info Value = the added accuracy the markets provide relative to other mechanisms, times the value that accuracy can give in improved decisions, minus the cost of maintaining the markets, relative to the cost of other mechanisms.

A highly accurate market has little value if other mechanisms can provide similar accuracy at a lower cost, or if few substantial decisions are influenced by accurate forecasts on its topic.

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Robin Hanson:

[...] I meant trying to field the highest value applications. That is naturally measured in accounting terms – value minus cost. Measures of popularity or familiarity would not at all be the same thing.

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Robin Hanson:

[One should] try to offer a cost-benefit calculation. You could count how many employees had ever gone to a TQM meeting, but that wouldn’t tell you if TQM is valuable or not.

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[Here's Robin Hanson's website. For your information (if you are a newbie), Robin Hanson is the most advanced researcher in the field of prediction markets. He co-invented the modern-day prediction markets, the concept of decision markets, and a new marked design, the Market Scoring Rule.]

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Related Info:

Using Prediction Markets to Track Information Flows: Evidence from Google – (PDF file – PDF file) – by Bo Cowgill, Justin Wolfers, and Eric Zitwewitz – 2008-01-06

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