Predicting Uncertain Outcomes Using Information Markets

Publication Type

Journal Article

Publication Date

2006

Abstract

Forecasting seems to be a ubiquitous endeavor in human societies. In this paper, information markets are introduced as a promising mechanism for predicting uncertain outcomes. Information markets are markets that are specially designed for aggregating information and making predictions on future events. A generic model of information markets is proposed. We derive some fundamental properties on when information markets can converge to the direct communications equilibrium, which aggregates all information across traders and is the best possible prediction for the event under consideration. Information markets, if properly designed, have substantial potential to facilitate organizations in making better informed decisions.

Keywords

Information market, prediction, trader behavior, information aggregation

Discipline

Computer Sciences | Management Information Systems

Research Areas

Information Systems and Management

Publication

New Mathematics and Natural Computation

Volume

2

Issue

3

First Page

281

Last Page

297

ISSN

1793-0057

Identifier

10.1142/S179300570600052X

Publisher

World Scientific Publishing

Additional URL

http://dx.doi.org/10.1142/S179300570600052X

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