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The issue aims to provide an introduction to those new to the field as well as to describe some of the new and exciting applications within firms. The line-up, listed below, includes a real who’s who of companies using internal markets. There is also a commentary on each article written by some of the leading academics.

I hope many of the papers will be of interest to some of the readers here. And please do get in touch with me if you have questions or comments on the issue.

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Link to the special issue (JPM, Volume 3,  Number 2)

Table of contents:

Introduction to Special Issue on Corporate Applications of Prediction Markets
Author: Strumpf, Koleman (Univ of Kansas)

The Innovation Engine at Rite-Solutions: Lessons from the CEO
Author: Lavoie, Jim (Rite-Solutions)

The Challenge of Incentive Alignment in the Application of Information Markets Within an Organization
Author: Hall, Art (Center for Applied Economics)

Examining Trader Behavior in Idea Markets: An Implementation of GE’s Imagination Markets
Authors: Spears, Brian; LaComb, Christina; Interrante, John; Barnett, Janet; Senturk-Dogonaksoy, Deniz (GE)

The Design of Idea Markets: An Economist’s Perspective
Author: Ottaviani, Marco (Kellogg School)

Hanson’s Automated Market Maker
Authors: Berg, Henry; Proebsting, Todd A. (Microsoft)

On Market Maker Functions
Author: Hanson, Robin (George Mason)

Inkling: One Prediction Market Platform Provider’s Experience
Author: Siegel, Adam (Inkling)

“The Emergence of Prediction Markets within Business Firms: A Skeptical Perspective from an Intrigued Academic.”
Author: Rhode, Paul W. (Univ of Arizona)

Private Prediction Markets and the Law
Author: Bell, Tom W. (Chapman)

Comment on Bell Article
Author: Litan, Robert E. (Kauffman Foundation and Brookings Institution)

- They lie about the people they hire —many of the new employees are in fact part-time (at best).

- They lie about their customers —some of the names you see on their “clients” webpages are in fact companies that have abandoned the experiment long ago. By keeping old customers in their listing and adding some brand-new prospects, they create artificially a cumulative effect so as to impress the gullible prospects that they try to hook up at those pitiful $400-a-seat vendor conferences.

- They lie about the benefits of prediction markets. Since (enterprise) prediction markets are just information aggregation mechanisms that can’t reach omniscience by essence, the only value of (E)PMs comes from the weaknesses of the competitive forecasting tools. Those weaknesses are not that numerous —hence, the applications of (E)PMs are probably limited.

- They lie about the successes that their customers got. There isn’t a single detailed business case published about EPMs.

- They lie about the real age of the prediction markets —they make it like PMs are in childhood, whereas the reality check is that PMs are in adulthood. The first batch of contemporary PMs popped up in 1988 —that’s 21 years ago, folks. The starting point of the PM hype was in 2003–2004 —that’s 6 years ago, now. It is not true to say that (E)PMs are a novelty. By now, we should be able to pause, assess their benefits, and tell the world where exactly they can make an impact (if any).

Because the lying is still going on, I have decided to downgrade the prediction market people and the prediction market organizations who are opaque —and to upgrade the ones who are open. I hope that my tougher stance will incite everyone to be more truthful.

ADDENDUM

An uncertain future – A novel way of generating forecasts has yet to take off. – by The Economist – 2009-02-26

Both Xpree and Inkling Markets boast Electronic Arts as their client.

Previously: The truth about prediction markets