I dont’ know that you could say Chicago was the “weakest link”, just because it got dropped first in the voting. The political process caused it to go early. However, Michael Giberson is wrong to imply that the prediction was accurate on the basis that Chicago and Rio were fairly close. Let’s keep in mind that the options are about as discrete as they come. Even if Chicago were to have come in a close second, it would have been a complete miss by the market.

If one needed to make a decision that depended on whether Chicago would win the bid, the prior choice would have been completely wrong, once the true outcome was revealed.

I have to agree with Chris. The market participants did not possess a sufficient level of information completeness to arrive at the correct prediction. Furthermore, the discrete nature of the outcomes made it a risky prediction. Finally, I’m guessing that few, if any, of the IOC voting members were involved in the prediction markets, leading one to conclude that all (or almost all) of the market participants were “noise” traders.

Elsewhere, another commentator claimed that, because the prediction market started to show Chicago’s share falling during the morning of the vote, this was evidence that prediction markets work. Hardly. It does show that prediction markets rarely provide accurate predictions sufficiently in advance of the outcome, in order for useful decisions to be made.

The prediction market industry really needs to investigate the determinants of success and which types of markets (issues) have the potential to provide consistently accurate predictions. Way too much time and effort is being spent arguing about meaningless markets, trivial questions, and false accuracy claims.

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Previously: The Chicago candidacy, which was favored by the prediction markets (and gullible bettors like Ben Shannon), is the one that fared the worst.

Previously: Chicago won’t have the Olympics in 2016.

ADDENDUM:

- BetFair’s event derivative prices:

- InTrade’s event derivative prices:

- HubDub’s event derivative prices:

Who will recieve the winning bid to host the 2016 Olympics?

- Here’s what happened to the Paris 2012 event derivative:

Prof Michael Giberson:

I think the “small, secretive committee” explanation is weak [].

Bradbury does an excellent job sifting through the shifting coalitions revealed in the three rounds of IOC voting. Neither Madrid nor Toyko showed any significant ability to attract votes as the rounds proceeded. It was going to be Rio or Chicago all along, but Chicago was weakest in the four-way vote and lost early, leaving the games to go to Brazil.

Based on Bradbury’s [analysis], I’m convinced that the decision was pretty much a toss up between Chicago and Rio. That conclusion was also implied in the prediction market prices just before the decision. Sure, the prediction markets favored Chicago, slightly, over Rio; I don’t think you can call it a miss given the closeness of the decision.

Well:

1. The voting mechanism of the IOC regarding the 2016 Olympics venue was known to the news media and the prediction market traders (like Ben Shannon) well before the vote.
2. The prediction market traders gave a surreal boost to the Chicago probability.
3. The reality check is that Chicago was the weakest candidate.
4. Hence, the prediction market traders were not informed enough about the basic facts regarding the IOC voting, for the reason that the International Olympic Committee is governed by secrecy, politics, and pork.

Next: “I have to agree with Chris. The market participants did not possess a sufficient level of information completeness to arrive at the correct prediction.”

Previously: The Chicago candidacy, which was favored by the prediction markets (and gullible bettors like Ben Shannon), is the one that fared the worst.

Previously: Chicago won’t have the Olympics in 2016.

ADDENDUM:

- BetFair’s event derivative prices:

- InTrade’s event derivative prices:

- HubDub’s event derivative prices:

Who will recieve the winning bid to host the 2016 Olympics?

- Here’s what happened to the Paris 2012 event derivative:

I don’t share his views, but I wanted to link to his piece for you to make up your own mind about the issue.

No “careful observer knew this in advance” (about Chicago being a lemon), for the simple reason that if they knew, they would have downgraded Chicago on the InTrade and BetFair prediction markets, and Ben Shannon would have not bet $6,000 on Chicago.

I look forward to your contrite correction on the frontpage of Knowledge Problem —in bold, and with a link to Midas Oracle, stating that “Midas Oracle is the only website in the world to have told you *not* to bet on Chicago —and to stay (far) away from any Olympics venue prediction market.”

My thesis holds: The International Olympic Committee (IOC) is a close aristocratic group that does not leak out good information.

Previously: The Chicago candidacy, which was favored by the prediction markets (and gullible bettors like Ben Shannon), is the one that fared the worst.

Previously: Chicago won’t have the Olympics in 2016.

ADDENDUM:

- BetFair’s event derivative prices:

- InTrade’s event derivative prices:

- HubDub’s event derivative prices:

Who will recieve the winning bid to host the 2016 Olympics?

- Here’s what happened to the Paris 2012 event derivative:

Next: “I have to agree with Chris. The market participants did not possess a sufficient level of information completeness to arrive at the correct prediction.”

Prof Michael Giberson:

Chris, isn’t it odd for you to state “Chicago had not the slightest chance to begin with.” The phrase implies you believe that the probability of Chicago’s selection was near zero all along, but you have been claiming that it is impossible to predict anything about the outcomes of IOC selection processes.

Also, the NYT article reports on backbiting and disarray at the USOC. While the article is published after the IOC decision, presumably any careful observer knew this in advance [*] and you are suggesting it was relevant to the outcomes of the IOC market, i.e. you are suggesting it is a reason to have believed the Chicago selection as particularly unlikely. Again, this suggestion is contrary to your earlier views suggesting IOC decisions are unpredictable because there is no good information to aggregate.

I look forward to your correction!

[*] You presume too much, doc.

If, as you said quite cockily, “any careful observer knew this in advance“, then the (mass or vertical) media would have reported about that, and, logically:

1. the prediction market traders would have downgraded Chicago early on;
2. Ben Shannon (who is a smart man and a well informed bettor) would not have bet 6,000 bucks on Chicago.

The proof is in the pudding, doc.

You are wrong and I am right.

Had Ben Shannon listened to us, he would have spared $6,000 —yes, that’s six thousand US dollars.

Next: Could we have divined that Chicago was a lemon?

- They are interested in propagating a myth, rather.

- Don’t pay $400 for a vendor phone-booth conference on prediction markets, where their merits are hyper inflated to serve commercial purposes. Stay at home and read Midas Oracle.

Previously: The Chicago candidacy to host the Olympics, which was favored by the prediction markets (and gullible bettors like Ben Shannon), is the one that fared the worst.

Previously: Will Chicago get the Olympics? Don’t bet on it. Too risky.

Next: Could we have divined that Chicago was a lemon?

Look up prof Michael Giberson’s comment below my highly intelligent post, “Why an analyst should assess each newly created prediction market“.

And compare it with Paul Kedrowski’s bad analysis, followed by InTrade CEO John Delaney’s equally bad analysis.

Read the New York Times for more on why Chicago had not the slightest chance to begin with.

Previously: Will Chicago get the Olympics? Don’t bet on it. Too risky.

Next: Could we have divined that Chicago was a lemon?

Next: “I have to agree with Chris. The market participants did not possess a sufficient level of information completeness to arrive at the correct prediction.”

The Chicago candidacy, which was favored by the prediction markets (and gullible bettors like Ben Shannon), is the one that fared the worst.

As we have blogged here many times, not every prediction market is created equal. Some are bound to aggregate bits of known information. Some others (e.g., the Olympic city prediction markets) are not able to do that, because no good information is leaking out. The IOC is a close aristocratic group that does not leak out good information. Those who forgot that and bet the farm on Chicago are now licking their wounds. You need an information analyst to assess whether a particular prediction market is pertinent.

- BetFair’s event derivative prices:

- InTrade’s event derivative prices:

- HubDub’s event derivative prices:

Who will recieve the winning bid to host the 2016 Olympics?

- Here’s what happened to the Paris 2012 event derivative:

Previously: Will Chicago get the Olympics? Don’t bet on it. Too risky.

Next: Could we have divined that Chicago was a lemon?

Next: “I have to agree with Chris. The market participants did not possess a sufficient level of information completeness to arrive at the correct prediction.”

http://www.chicagotribune.com/business/yourmoney/chi-0704160447apr17,0,2547860.column?coll=chi-business-hed

Prof, you were 100% wrong.

Prediction markets on which country will host the Olympics have never worked.

- BetFair’s event derivative prices (on the far right of the chart, you can see that the price went down to zero):

- InTrade’s event derivative prices (on the far right of the chart, you can see that the price went down to zero):

- HubDub’s event derivative prices:

Who will recieve the winning bid to host the 2016 Olympics?

- Here’s what happened to the Paris 2012 event derivative: