In the real world, the reason people use markets is to make money. If an outcome is accurately predicted, it is profitable. In virtual markets, “play money is not a bad predictor, but economists say when real money is at stake, it’s a better indicator,” [Stanford professor Eric] Zitzewitz said. [...]

Abbott declined to discuss how it is using prediction markets, but Zitzewitz said pharmaceutical companies are using prediction tools for sales forecasting and product development. “Suppose you have a bunch of scientists who have some ideas on what chemical compounds might be effective in a new drug,” he said. “But you don’t know how a new drug would fare in clinical trials.” Hence, the company could create a market and pose the possibilities to a swath of people across the organization. “You could run a market on the potential for FDA approval” for instance, Zitzewitz said.

I’d be cautious about prediction markets whose contract expiry is based on the decision made by a small committee (as we have seen with two recent predictive debacles). However, the FDA is a public and science-based group, so I suppose that Eric Zitzewitz’s suggestion is pertinent —I’d like to have other economists’ opinion to be really sure, though. (From Robin Hanson, Justin Wolfers, Paul Tetlock, Koleman Strumpf, etc.)

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Of the nine remaining firms left in the market, Inkling is listed as having second-highest probability of being purchased.

Not knowing anything about that merger and acquisition business, I’d bet on Yahoo! using Inkling Markets in Yootopia and/or Yahoo! buying out Inkling Markets. My suspicion comes from the fact that I spotted Yahoo!’s David Pennock lauding Inkling Markets three times on his blog and elsewhere, while he hasn’t uttered one single word about WSX, which uses the same mechanism design (MSR). Just a wild speculation, here —don’t take this as a serious analysis or insight.

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#2. A close analysis of the Chicago Tribune story strikes another blow to HSX Alex Costakis’ conspiracy theory that says that ABC7 San Francisco should have added a historical perspective to its Inkling Markets story. Indeed, the Chicago Tribune story, too, does not make any reference to any of the other prediction exchanges (betting exchanges) or prediction market consultants. There is a reason for that. Both stories are constructed as a one-shot spotlight on one brand-new Web-based service provider. Although I agree with HSX Alex Costakis that it would be better to have a big picture or historical paragraph somewhere, such mono-brand or mono-company stories are common in the media and blogs —as HSX Alex Costakis would know if he were a bit more litterate in the reporting business. To give one only one instance, when Tech Crunch (the world’s premier blog on IT start-ups) covered Inkling Markets in September 2006, the writer only mentions the Hollywood Stock Exchange as Inkling’s competitor —nowhere in the Tech Crunch story will you spot the names of the Foresight Exchange or NewsFutures, which are the veteran play-money prediction exchanges, let alone the names of TradeSports or BetFair. Such mono-product news article is common in all topics, not only technology, but in business, art, politics, etc.

On the other hand, I agree with HSX Alex Costakis that long dissertations on prediction markets and betting exchanges should be as accurate and complete as possible. But my point is that both the ABC7 San Francisco story and the Chicago Tribune stories did not fall in this category. Thus, HSX Alex Costakis’ dual rant against ABC7 was not pertinent. See: Hollywood Stock Exchange’s Alex Costakis makes historical mistake, TOO. On top of that, it gave the impression that HSX and NewsFutures were frightened to death by a brand-new, innovative competitor. See: Does Inkling CEO Adam Siegel deserve capital punishment, really!?? The publication of this story probably prompted the NewsFutures CEO to drop the link to Midas Oracle from the NewsFutures blogroll. See: Were the NewsFutures real-money prediction markets on Dutch elections accurate? Thank God, a close look at the Google Analytics web stats afterwards showed that this link dropping had the reverse effect that the one intended by our French luminary (EJSS): the number of visitors and pageviews slightly increased. See: Did people follow the NewsFutures CEO’s advice and drop Midas Oracle? It sounds logical, if you think of it. Are you waiting after a Frenchman for advice on which sites or blogs to visit or not to visit? It seems to me that people don’t give the first fig about EJSS’ reading advice. The center of the Universe is Google, not EJSS —I’m so sorry to burst his bubble.

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FOOTNOTES:

a) HSX Alex Costakis is a correct and polite man who understands that I can disagree with him sometimes.

b) The Hollywood Stock Exchange is a great play-money betting exchange and HSX Research is a great software and analysis provider.

c) HSX Alex Costakis is a great prediction exchange executive and prediction market consultant.

d) HSX Alex Costakis’s understanding of the mediablogosphere is abyssal —and his internet marketing skills are inexistent. (((But this last point could also be made about all his competitors. )))