Prediction Markets at Google

MIS 501

Googles: Prediction Markets• What are Prediction Markets?

– What are their components?– How do they work?– What is similar and unique relative to other

markets?– What do they tell us?

Prediction Markets• What does the price of a “stock” mean?

– What information is conveyed by the price?

Prediction Markets• Why or why wouldn’t prediction markets

be better than …– Polling?– Experts?

• What is different about markets compared to these other information sources?

Wisdom of Crowds?• What’s the idea behind the wisdom of

crowds?– Do you believe that crowds can be “wise?”– Where does this work? Where doesn’t it

work?

So, how should these things be run?

• How do you motivate participation?– Why wouldn’t financial incentives work at

Google?– What did appear to work? Why?

So, how should these things be run?

• Why are longshot bets a problem?

• What do we want traders to focus on when trading?

• Is insider trading a problem with corporate prediction markets?

Prediction Market Resources• Bo Cogwell’s Blog• Prediction Markets at confab.yahoo• The Science of Success (James

Surowiecki• Prediction markets (wikipedia)• Crowdcast (Video)