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The Forrester executive summary:

The “wisdom of crowds” is capturing the attention of corporate strategists across the globe, and, as a result, many are now looking to prediction markets — speculative markets in which traders collectively predict future events — to generate collective intelligence. For enterprises, prediction markets bring unique value: They focus on the future, aggregate diverse information pools that can be applied to multiple decision-making domains, create streams of actionable data suitable for executive decision-making, and can often cut through corporate politics and pressures at lower cost than traditional forecasting methods. Market researchers will, however, need to have an active hand in the management of these mechanisms, ensuring strong management support, the right incentives for traders, and a focus on appropriate questions. When executed properly, the value to the enterprise is enormous; as a result, Forrester believes that prediction markets will ultimately find a permanent home in the market research toolbox.

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For information on hard-copy or electronic reprints, please contact the Client Resource Center at +1 866.367.7378, +1 617.617.5730, or resourcecenter –at– forrester –dot– com. We offer quantity discounts and special pricing for academic and nonprofit institutions.

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APPENDIX #1: Prediction Markets – DRM Review

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APPENDIX #2:

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Here is a list of companies that provide software for prediction markets:

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Inkling Markets – (MSR + AMM)

NewsFutures – (CDA + optional AMM + SR)

Xpree – (MSR + AMM)

Zocalo – (CDA + MSR + AMM) – (open-source)

Nosco – (CDA + MSR + AMM)

QMarkets – (MSR + AMM)

Ask Markets – (MSR + AMM)

Exago Markets – (CDA + optional AMM)

Gexid – (?)

ProKons – (?)

Spigit – (?)

HSX Virtual Markets – (Virtual Specialist + AMM)

HubDub – (MSR + AMM) – (not licensed)

Yahoo!‘s Prediction Exchange – (MSR + AMM + DPMM) – (not licensed)

Google‘s Prediction Exchange – (CDA) – (not licensed)

MicroSoft PredictionPoint – (MSR + AMM) – (not licensed)

InTrade – (CDA + AMM for play money) – (not licensed)

TradeSports – (CDA + AMM for play money) – (not licensed)

Iowa Electronic Markets – (CDA) – (not licensed)

HedgeStreet – (CDA) – (not licensed)

TradeFair – (CDA) – (not licensed)

BetFair – (CDA) – (not licensed)

Trading Technologies International – (CDA) – (not for event derivatives)

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Here’s a list of prediction market consultants:

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Robin Hanson – (George Mason University, Virginia, U.S.A.)

• Robin Hanson does prediction market consulting work, and have no exclusive arrangements.
• “I’m more interested in helping groups that want to add lots of value to big decisions, versus groups that just want to dabble in a new fad.”

Inkling – URL: Inkling Markets – (Chicago, Illinois, U.S.A.)

• Adam Siegel
• Nathan Kontny

NewsFutures – (Maryland, U.S.A. & Paris, France, E.U.)

• Emile Servan-Schreiber — Post Archive at Midas Oracle
• Maurice Balick

Xpree – (California, U.S.A.)

• Mat Fogarty

Chris Hibbert – (California, U.S.A.)

• Chris Hibbert (Software architect / Zocalo project manager) — Post Archive at Midas Oracle
• Chris Hibbert’s personal website — Chris Hibbert’s personal blog —
• Chris Hibbert’s CommerceNet profile — (His stint there ended in mid 2006.)

Justin Wolfers – (University of Pennsylvania’s Wharton Business School, Pennsylvania, U.S.A.)

• Justin Wolfers takes on prediction market consulting work.
• The prediction market industry is “a case where the interaction between firm practice and academic research are reasonably close.”

Koleman Strumpf – (University of Kansas, Kansas, U.S.A.)

• Koleman Strumpf — Post Archive at Midas Oracle
• Koleman Strumpf can be approached to consult on prediction market projects.
• “Prediction markets help harness the knowledge of diverse groups. They have great potential as a tool for industry.”

Nosco – (Danemark, E.U.)

• Jesper Krogstrup
• Oliver Bernhard Pedersen

Qmarkets – (Israel)

• Noam Danon

Ask Markets – (Greece, E.U.)

• George Tziralis — Post Archive at Midas Oracle

HP Services & HP Labs – (U.S.A.)

• Predicting the future –with games — Introductory article
• Information Dynamics Lab — Internal prediction markets
• BRAIN – (Behaviorallly Robust Aggregation of Information in Networks) — Scoring Rules (i.e., non-trading technique)
• Bernardo A. Huberman – Bernardo Huberman – Senior Fellow & Director
• Kay-Yut Chen -
• Google Search for “prediction markets”

Hollywood Stock Exchange (HSX) & HSX Research – (L.A., California, U.S.A.)

• Prediction market consultancy firm
• Movie business

IntelliMarket Systems – (L.A., California, U.S.A.)

• Charles R. Plott – Charles Plott – (CalTech Inst., California, U.S.A.)

Gexid – Global Exchange for Information Derivatives – (Germany, E.U.)

• Bernd Ankenbrand — Post Archive at Midas Oracle

ProKons – (Germany, E.U.)

• Peter Gollowitsch

Exago Markets – (Portugal, E.U.)

• Pedro Da Cunha

NimaniX – (Israel)

• Elad Amir (CEO), Littal Shemer Haim (VP Business development), David Shahar (VP R&D)

Michael Giberson – (Texas, U.S.A.)

• Michael Giberson (Energy Economist – Center for Energy Commerce, Rawls College of Business, Texas Tech University) — Post archive at Midas Oracle
• Knowledge Problem – Blog on economics, energy policy, more.

Other Consulting Firms

McKinsey – (U.S.A.)

• Google Search for “prediction markets”
• The Promise Of Prediction Markets – by McKinsey – 2008-04-XX

Accenture – (U.S.A.)

• Google Search for “prediction markets”

Gartner – (U.S.A.)

• Google Search for “prediction markets”

Forrester – (U.S.A.)

• Google Search for “prediction markets”
• Prediction Markets: Wisdom Of The Crowd Comes To The Enterprise. – 2008-07-14

The Boston Consulting Group – (U.S.A.)

• Google Search for “prediction markets”

CapGemini – (U.S.A.)

• Google Search for “prediction markets”

KPMG – (U.S.A.)

• Google Search for “prediction markets”

Price Waterhouse Cooper – (U.S.A.)

• Google Search for “prediction markets”

Ernst & Young – (U.S.A.)

• Google Search for “prediction markets”

Deloitte – (U.S.A.)

• Google Search for “prediction markets”

IBM – (U.S.A.)

• Google Search for “prediction markets”

EDS – (U.S.A.)

• Google Search for “prediction markets”

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- 10% of them followed my links to the 2 HubDub prediction markets on John Edwards.

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Remember that those web stats count only the web visitors, not the feed subscribers —who are more numerous, and whom I focus more on.

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TAKEAWAY: A popular PMJ website, which would associate fresh news and betting recommendations, would send many people to the prediction markets.

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The mainstream media and the classic bloggers will never deal with real-money prediction markets the way they should be dealt with —for multiple reasons (moral, ethical, legal, etc.). And for other reasons, they will never link to the play-money prediction markets.

Look Justin Wolfers at the Wall Street Journal: He is the most excited about prediction markets. Yet, he does not link to InTrade directly. He does not link to the InTrade real-money prediction markets. Hence, his blah blah blah does not translate into more revenues for InTrade.

What it takes is a brand-new media organization, entirely devoted to prediction markets, and run by die-hard prediction market people.

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Please, guys, help me.

• cfm |-at-| midasoracle |.|-com-|
• chrisfmasse |-at-| gmail |.|-com-|

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Consensus Point and Xpree are graded 5 / 10.

My list of business connections is 9 times longer than his. So, mine is longer than his. I have the longest.

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Don’t forget to connect with our newly created “Prediction Markets” group on LinkedIn:

http://www.linkedin.com/e/gis/152133/0F2F81268260

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I fully appreciate the work that Emile and others have done but just because something hasn’t worked before doesn’t mean it can’t happen. [...] Sometimes ideas take time and a fresh perspective before they achieve their full potential. [...]

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My thoughts:

1. The future is present today as a seed. If we examine today’s seed under a microscope, we can see part of the future. The fact is that the prices/probabilities from NewsFutures’ play-money prediction markets are NEVER quoted by journalists and bloggers. They quote only InTrade, TradeSports, BetFair and the Hollywood Stock Exchange.
2. “Time” can change that, indeed, provided that HubDub multiplies volumes by a factor of one million —which is what I wish for them.
3. I don’t see the “fresh perspective” that HubDub would be bringing to the table. HubDub resembles a lot to NewsFutures. (The differences in terms of market design, automated market maker, and breath of topics, are a minor.) HubDub is a generalist, play-money prediction exchange, just like NewsFutures is.

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Insider trading is one of the wicked problems, perhaps. Intrade is about providing the best predictive information. If insiders have information, then getting that information reflected in the market increases the quality of the information. I know this is not the conventional view concerning insider trading, and I am not arguing wholesale adoption or acceptance of insider trading. But we all know that, in the real world, insiders trade on inside information. We have even had markets on insider trading. Our view is to get the best information available into the market while we make sure there is some fair protection for outsiders.

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As I said, the problem is that this view is very unpopular among event derivative traders.

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APPENDIX: Economic arguments in favor of insider trading.

Thanks to Ms. Stacy fo the link.

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Koleman Strumpf, one of the “notable exceptions”.

Here’s his latest post on Midas Oracle (about Inkling Markets).

Here’s his latest interview: CNN.

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John Delaney (CEO of InTrade) – (InTrade PDF file – CFTC PDF file):

Nearly all leading academics, not known for their attraction to unanimity, have publicly supported event markets. A great majority of these academics have been supplied with Intrade market data in the past, a service that Intrade intends to continue, for all study leads to an increase in transparency and understanding of event markets. It seems that the leading event market academics make no distinction between the benefits derived from academic owned markets like Iowa Electronic Markets and commercial market platforms like Intrade.

Yet many academics, with some NOTABLE EXCEPTIONS, do temper their policy prescription to suggest a “safe harbor” for academic sites where research might be more generally available. As noted above Intrade has gladly supplied its event market data, typically free of charge to most of the leading prediction market academics and their students, and we are committed to encouraging the future study of event markets by continuing to supply our event market data free of charge or at very deep discounts. The academics that study event markets do a great service in developing our understanding of the strengths and weaknesses of event markets. Some commentators suggest that market liquidity and breadth typically benefit all event market stakeholders. Thus far commercial platforms like Intrade seem to be providing the greatest depth and breadth in event markets.

As Intrade has been a staunch supporter of event market academic study, and supplies greater depth and liquidity in its event markets than any other platform, it seems strange not to be a preferred purveyor. Perhaps the predominant reason many academics have held back from advocating and treating all event markets alike is a sense that initiatives to clarify or unwind the legislation restraining the optimal development of event markets is unlikely to be achievable. It seems many academics and commentators suggest a slow bureaucratic and pragmatic caution rather than focus on the optimal result. While the optimal result may be more challenging to achieve, for consistency, for better price discovery for the benefit of all, as well as for the development of Intrade, we encourage CFTC to apply common goals, objectives and standards for all participants.

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Here is another of the “notable exceptions”:

• Steve Levitt

So, you see, Koleman Strumpf is in very good company. That’s not the quantity that counts. That’s the quality.

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[...] I was heartened to read John Delaney’s (InTrade CEO) contribution [...]. I would certainly have endorsed this contribution – well crafted, robust, articulate and (imo) stating the blindingly obvious [...].

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Yes, his input was great, but, alas, it won’t win in the end.

The CFTC will probably rule out the “excluded commodities” way (against the will of HedgeStreet and the CME Group) in favor of the “exempt commodities” route (for a reason of convenience). In parallel (and maybe as a consequence of), the CFTC will probably direct those “event markets” to lightly-regulated, US-based, small prediction exchanges —with plenty of restrictions upon them. Those restrictions are what is still up in the air, in my assessment.

So, the picture does not look like the CFTC ruling will please InTrade CEO John Delaney —but if I’m wrong in the end, of course, I’ll be happy.

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As for me, I’m intrigued by the contribution from “Crystal World Markets” – (PDF file). I will blog about it, at a later time, this Summer 2008.

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US scientists have invented a pill that can boost memory.

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Invented by Dr Gary Lynch from the University of California.

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John Delaney (CEO of InTrade) – (InTrade PDF file – CFTC PDF file):

Nearly all leading academics, not known for their attraction to unanimity, have publicly supported event markets. A great majority of these academics have been supplied with Intrade market data in the past, a service that Intrade intends to continue, for all study leads to an increase in transparency and understanding of event markets. It seems that the leading event market academics make no distinction between the benefits derived from academic owned markets like Iowa Electronic Markets and commercial market platforms like Intrade.

Yet many academics, with some notable exceptions, do temper their policy prescription to suggest a “safe harbor” for academic sites where research might be more generally available. As noted above Intrade has gladly supplied its event market data, typically free of charge to most of the leading prediction market academics and their students, and we are committed to encouraging the future study of event markets by continuing to supply our event market data free of charge or at very deep discounts. The academics that study event markets do a great service in developing our understanding of the strengths and weaknesses of event markets. Some commentators suggest that market liquidity and breadth typically benefit all event market stakeholders. Thus far commercial platforms like Intrade seem to be providing the greatest depth and breadth in event markets.

As Intrade has been a staunch supporter of event market academic study, and supplies greater depth and liquidity in its event markets than any other platform, it seems strange not to be a preferred purveyor. Perhaps the predominant reason many academics have held back from advocating and treating all event markets alike is a sense that initiatives to clarify or unwind the legislation restraining the optimal development of event markets is unlikely to be achievable. It seems many academics and commentators suggest a slow bureaucratic and pragmatic caution rather than focus on the optimal result. While the optimal result may be more challenging to achieve, for consistency, for better price discovery for the benefit of all, as well as for the development of Intrade, we encourage CFTC to apply common goals, objectives and standards for all participants.

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Prediction Market Industry Association – (PMIA)

4) Lobby for a clear legal and regulatory environment conducive to the productive adoption of prediction markets by individuals, firms, and governments, and ensuring free access to these markets by traders.

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The PMIA’s first board is comprised of:

[...]
Robin Hanson (George Mason University)
Justin Wolfers (Wharton School – University of Pennsylvania)

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Nearly all leading academics, not known for their attraction to unanimity, have publicly supported event markets. A great majority of these academics have been supplied with Intrade market data in the past, a service that Intrade intends to continue, for all study leads to an increase in transparency and understanding of event markets. It seems that the leading event market academics make no distinction between the benefits derived from academic owned markets like Iowa Electronic Markets and commercial market platforms like Intrade.

Yet many academics, with some notable exceptions, do temper their policy prescription to suggest a “safe harbor” for academic sites where research might be more generally available. As noted above Intrade has gladly supplied its event market data, typically free of charge to most of the leading prediction market academics and their students, and we are committed to encouraging the future study of event markets by continuing to supply our event market data free of charge or at very deep discounts. The academics that study event markets do a great service in developing our understanding of the strengths and weaknesses of event markets. Some commentators suggest that market liquidity and breadth typically benefit all event market stakeholders. Thus far commercial platforms like Intrade seem to be providing the greatest depth and breadth in event markets.

As Intrade has been a staunch supporter of event market academic study, and supplies greater depth and liquidity in its event markets than any other platform, it seems strange not to be a preferred purveyor. Perhaps the predominant reason many academics have held back from advocating and treating all event markets alike is a sense that initiatives to clarify or unwind the legislation restraining the optimal development of event markets is unlikely to be achievable. It seems many academics and commentators suggest a slow bureaucratic and pragmatic caution rather than focus on the optimal result. While the optimal result may be more challenging to achieve, for consistency, for better price discovery for the benefit of all, as well as for the development of Intrade, we encourage CFTC to apply common goals, objectives and standards for all participants.

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Prediction Market Industry Association – (PMIA)

4) Lobby for a clear legal and regulatory environment conducive to the productive adoption of prediction markets by individuals, firms, and governments, and ensuring free access to these markets by traders.

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The PMIA’s first board is comprised of:

[...]
Robin Hanson (George Mason University)
Justin Wolfers (Wharton School – University of Pennsylvania)

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