Aggregation Mechanisms for Crowd Predictions

Palan, S., Huber, J., Senninger, L., 2019. “Aggregation mechanisms for crowd predictions”, University of Graz, School of Business, Economics and Social Sciences Working Paper 2019-01.

35 Pages Posted: 6 Jun 2019

See all articles by Stefan Palan

Stefan Palan

University of Graz; University of Innsbruck

Juergen Huber

University of Innsbruck; University of Vienna - Department of Finance

Larissa Senninger

University of Innsbruck, Students

Date Written: May 15, 2019

Abstract

When the information of many individuals is pooled, the resulting aggregate often is a good predictor of unknown quantities or facts (“wisdom of crowds”). This aggregate predictor frequently outperforms the forecasts of experts or even the best individual forecast included in the aggregation process. However, an appropriate aggregation mechanism is considered crucial to reaping the benefits of a “wise crowd”. Of the many possible ways to aggregate individual forecasts, we compare (uncensored and censored) mean and median, continuous double auction market prices and sealed bid-offer call market prices in a controlled experiment. We use an asymmetric information structure where subjects know different subsets of the total information needed to exactly calculate the asset value to be estimated. We find that prices from continuous double auction markets clearly outperform all alternative approaches for aggregating dispersed information and that information is only useful to the best-informed subjects.

Keywords: information aggregation, asymmetric information, wisdom of crowds

JEL Classification: C53, C83, G14

Suggested Citation

Palan, Stefan and Huber, Juergen and Senninger, Larissa, Aggregation Mechanisms for Crowd Predictions (May 15, 2019). Palan, S., Huber, J., Senninger, L., 2019. “Aggregation mechanisms for crowd predictions”, University of Graz, School of Business, Economics and Social Sciences Working Paper 2019-01.. Available at SSRN: https://ssrn.com/abstract=3391052 or http://dx.doi.org/10.2139/ssrn.3391052

Stefan Palan (Contact Author)

University of Graz ( email )

Universitätsstraße 15/F2
Graz, 8010
Austria
+433163807306 (Phone)
+433163809580 (Fax)

HOME PAGE: http://academic.palan.biz

University of Innsbruck ( email )

Universitaetsstrasse 15/4
Innsbruck, 6020
Austria
+43512507-2846 (Fax)

HOME PAGE: http://academic.palan.biz

Juergen Huber

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

University of Vienna - Department of Finance ( email )

Bruenner Strasse 72
Vienna, 1210
Austria

Larissa Senninger

University of Innsbruck, Students ( email )

Innsbruck
Austria

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