Are prediction markets useful to you?

Chris F. Masse December 2nd, 2008

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It’s “pretty clear” that the prediction markets on political elections aggregate information from the polls —and from the political experts.

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Previously: #1 - #2 - #3 - #4 - #5 - #6

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It’s “pretty clear” that:

  1. InTrade has been over-selling the predicting power of its prediction markets.
  2. The prediction markets are information aggregation systems —not magical tools.
  3. The main benefit of a prediction market is to express an aggregated expected probability. Most of the times, this is of low utility.
  4. In complicated situations, this aggregation will contrast well with a poor reporting. In these instances, the prediction market is a useful source of information.

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2 Responses to “Are prediction markets useful to you?”

  1. # Nigel EcclesNo Gravataron 02 Dec 2008 at 10:15 AM

    I tend to agree. However there is an interesting analysis on whether markets follow polls here: http://flowingdata.com/2008/10.....sus-polls/

    (Spoiler alert: it shows the markets leading polls)

  2. # Who needs Robin Hanson’s Policy Analysis Market when we have plain, classic, old-fashioned, market-free intelligence reports leaked to the mass media by the Commission on the Prevention of Weapons of Mass Destruction Proliferation and Terrorism? | Mon 02 Dec 2008 at 11:14 AM

    [...] Any prediction market on the likelihood of terrorist acts perpetrated on US cities would simply aggregate this kind of information, which terrorism experts and journalists are already aware of (since they can read). –> Low social utility. [...]

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