A Twitter-Based Prediction Market: Social Network Approach

16 Pages Posted: 30 Apr 2012

See all articles by Liangfei Qiu

Liangfei Qiu

University of Florida - Warrington College of Business Administration

Huaxia Rui

University of Rochester - Simon Business School

Andrew B. Whinston

University of Texas at Austin - Department of Information, Risk and Operations Management

Date Written: December 1, 2011

Abstract

Information aggregation mechanisms are designed explicitly for collecting and aggregating dispersed information. An excellent example of the use of this "wisdom of crowds" is a prediction market. The purpose of our Twitter-based prediction market is to suggest that carefully designed market mechanisms can elicit and gather dispersed information that can improve our predictions. We develop an information system that combines the power of prediction markets with the popularity of Twitter. Simulation results show that our network-embedded prediction market can produce better predictions as a result of the information exchange in social networks and can outperform other non-networked prediction markets. We also demonstrate that forecasting errors decrease with the cost of acquiring information in a network-embedded prediction market.

Keywords: prediction market, social networks, information acquisition

JEL Classification: D83, D85, C72

Suggested Citation

Qiu, Liangfei and Rui, Huaxia and Whinston, Andrew B., A Twitter-Based Prediction Market: Social Network Approach (December 1, 2011). Available at SSRN: https://ssrn.com/abstract=2047846 or http://dx.doi.org/10.2139/ssrn.2047846

Liangfei Qiu (Contact Author)

University of Florida - Warrington College of Business Administration ( email )

Gainesville, FL 32611
United States

HOME PAGE: http://sites.google.com/site/qiuliangfei/

Huaxia Rui

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Andrew B. Whinston

University of Texas at Austin - Department of Information, Risk and Operations Management ( email )

CBA 5.202
Austin, TX 78712
United States
512-471-8879 (Phone)

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