Professor Thomas Rietz (Iowa Electronic Markets) was so wrong on the usefulness of prediction markets about the 2016 Summer Olympics in Chicago.

Chicago Olympic Market Might Have Value, Says Reitz (Chicago Tribune, April 17)
A credible source of information about Chicago&#8217-s chances of hosting the 2016 Olympics would have value, says columnist Bill Barnhart. Local real estate developers, hotel operators, employment agencies, vendors of products and services to major events and others have a direct stake in whether or not an Olympics is staged here. Politicians and civic leaders presumably would want to know whether the city&#8217-s bid has a chance, so that they wouldn&#8217-t throw good money after bad. An auction market centered on whether Chicago will win could provide that information, even if there were no huge payoff for hedgers or speculators, said finance professor THOMAS RIETZ at the University of Iowa, a board member of the popular Iowa Electronic Markets. The Iowa market limits wagers to $500 but has an enviable track record in picking the winners of national elections. &#8220-Our goal is to aggregate information, which is a different goal than being able to hedge the economic risk associated with something like this,&#8221- Rietz said. &#8220-I don&#8217-t think it&#8217-s an outlandish idea.&#8221-,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&#8217-s event derivative prices (on the far right of the chart, you can see that the price went down to zero):


InTrade&#8217-s event derivative prices (on the far right of the chart, you can see that the price went down to zero):


– HubDub&#8217-s event derivative prices:

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

Prediction Markets Definitions – REDUX REDUX

No GravatarI would like to comment on the post from the Hatena Diary blog. (By the way, please note that my URL has changed, because I corrected one word in the post title. Sorry for the inconvenience.)

#1. Speculation-oriented prediction markets/exchanges: TradeSports, BetFair.

#2. Hedging-oriented prediction markets/exchanges: HedgeStreet and all the Chicago exchanges that will do binary, European call options.

#3. Forecast-oriented prediction markets/exchanges: Iowa Electronic Markets, AS CLAIMED BY THESE SCHOLARS WHOSE TASK WAS TO CONVINCE THE CFTC TO GRANT THEM A NO-ACTION LETTER. (They would have not gotten it, had they emphasized &#8220-speculation&#8221-. And, of course, &#8220-hedging&#8221- was out of question.) It&#8217-s a &#8220-claim&#8221- that might be discussed, since we&#8217-ve seen that TradeSports-InTrade is a much more powerful predictive tool for the US elections. Ditto for BetFair for U.K. elections.

#4. Decision-oriented prediction markets/exchanges: I would put here the kind of stuff that Robin Hanson is so excited about.

#5. Entertainment-oriented prediction markets/exchanges: Hollywood Stock Exchange, Washington Stock Exchange, Inkling, NewsFutures.

#6. Education-oriented prediction markets/exchanges: The Iowa Electronic Markets fits here, partially, regarding the use that professors around the country make of their markets in classrooms.


– I disagree with Google in #4. Maybe the Google internal prediction markets would fit in #3.

– I disagree with NewsFutures in #3 &#8212-I acknowledge (at least partially) the predictive power of play-money prediction exchanges, of course.


Should we judge markets/exchanges on INTENTIONS or on RESULTS? I don&#8217-t give a damn that TradeSports-InTrade and BetFair were created for speculation– if they have better predictive power than IEM, I&#8217-m fine with them. Ditto for the HSX. I don&#8217-t give the first fig that it was created as an entertainment tool. It&#8217-s the best forecasting tool for the movie business, period.


For the links to the prediction exchanges, see CFM.


Previous Blog Posts:

Prediction Markets DEFINITIONS – not a “taxonomy”

Professor Robin Hanson’s draft definitions is validated by professor Eric Zitzewitz.

Prediction Markets Definitions – REDUX

Prediction Markets Definitions – by Robin Hanson – 2006-11-21


Addendum: Robin Hanson has posted a comment&#8230-

“Oriented” is not clear enough for my tastes. Is this about trader motives? Trader results? Price results? Exchange motives?


My Answer: I meant &#8220-exchange motives&#8221-. [&#8230- See my comments. &#8230-] But now that I think of it, another classification taking account of the &#8220-price results&#8221- makes more sense.

Previous blog posts by Chris F. Masse: