Do Prediction Markets Aid Defenders in a Weak-Link Contest?
Cary Deck,
Li Hao (lhao@walton.uark.edu) and
David Porter
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Li Hao: Department of Economics, University of Arkansas
Working Papers from Chapman University, Economic Science Institute
Abstract:
Laboratory experiments have demonstrated that prediction market prices weakly aggregate the disparate information of the traders about states (moves) of nature. However, in many practical applications one might want to predict the move of a strategic participant. This is particularly important in aggressor-defender contests. This paper reports a set of such experiments where the defender may have the advantage of observing a prediction market on the aggressor’s action. The results of the experiments indicate that: the use of prediction markets does not increase the defender’s win rate; prediction markets contain reliable information regarding aggressors’ decisions, namely excess bid information, that is not being exploited by defenders; and the existence of a prediction market alters the behavior of the aggressor whose behavior is being forecast.
Keywords: Information Aggregation; Prediction Markets; Weak-Link Contests; Colonel Blotto (search for similar items in EconPapers)
JEL-codes: C7 C9 D7 D8 G1 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2013
New Economics Papers: this item is included in nep-for
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http://www.chapman.edu/research-and-institutions/e ... k-Link%20Contest.pdf
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Journal Article: Do prediction markets aid defenders in a weak-link contest? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:chu:wpaper:13-27
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