Abstract

http://ssrn.com/abstract=560070
 
 

References (28)



 
 

Citations (81)



 


 



Prediction Markets


Justin Wolfers


University of Michigan at Ann Arbor - Department of Economics; The Ford School of Public Policy, University of Michigan; University of Sydney Department of Economics; The Brookings Institution; Peterson Institute for International Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Kiel Institute for the World Economy

Eric Zitzewitz


Dartmouth College; NBER

April 2004

Stanford GSB Research Paper No. 1854

Abstract:     
We analyze the extent to which simple markets can be used to aggregate disperse information into efficient forecasts of uncertain future events. Drawing together data from a range of prediction contexts, we show that market-generated forecasts are typically fairly accurate, and that they outperform most moderately sophisticated benchmarks. Carefully designed contracts can yield insight into the market's expectations about probabilities, means and medians, and also uncertainty about these parameters. Moreover, conditional markets can effectively reveal the market's beliefs about regression coefficients, although we still have the usual problem of disentangling correlation from causation. We discuss a number of market design issues and highlight domains in which prediction markets are most likely to be useful.

Number of Pages in PDF File: 28

Keywords: Idea futures, forecasting, economic policy, information markets, prediction markets, policy evaluation, macroeconomics, microeconomics, public policy

JEL Classification: D7, D8, E3, E6, G1, H8, Q4


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Date posted: June 30, 2004  

Suggested Citation

Wolfers, Justin and Zitzewitz, Eric, Prediction Markets (April 2004). Stanford GSB Research Paper No. 1854. Available at SSRN: http://ssrn.com/abstract=560070 or http://dx.doi.org/10.2139/ssrn.560070

Contact Information

Justin Wolfers (Contact Author)
University of Michigan at Ann Arbor - Department of Economics ( email )
611 Tappan Street
Ann Arbor, MI 48109-1220
United States
734-764-2447 (Phone)
HOME PAGE: http://www.nber.org/~jwolfers
The Ford School of Public Policy, University of Michigan ( email )
735 South State Street, Weill Hall
Ann Arbor, MI 48109
United States
734-615-6846 (Phone)
HOME PAGE: http://www.nber.org/~jwolfers
University of Sydney Department of Economics ( email )
P.O. Box H58
Australia Square
Sydney, NSW 2006
Australia
The Brookings Institution ( email )
1775 Massachusetts Avenue, NW
Washington, DC 20036
United States
HOME PAGE: http://www.nber.org/~jwolfers
Peterson Institute for International Economics ( email )
1750 Massachusetts Avenue, NW
Washington, DC 20036
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
HOME PAGE: http://www.nber.org/~jwolfers
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
HOME PAGE: http://www.iza.org/en/webcontent/personnel/photos/index_html?key=1737

Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
HOME PAGE: http://www.cepr.org/researchers/details/rschcontact.asp?IDENT=157943
CESifo (Center for Economic Studies and Ifo Institute) ( email )
Poschinger Str. 5
Munich, DE-81679
Germany

Kiel Institute for the World Economy ( email )
P.O. Box 4309
Kiel, D-24100
Germany
Eric W. Zitzewitz
Dartmouth College ( email )
Hanover, NH 03755
United States
603-646-2891 (Phone)
603-646-2122 (Fax)
HOME PAGE: http://www.dartmouth.edu/~ericz
NBER ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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References:  28
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