PREDICTING UNCERTAIN OUTCOMES USING INFORMATION MARKETS: TRADER BEHAVIOR AND INFORMATION AGGREGATION

Yiling Chen (), Chao-Hsien Chu () and Tracy Mullen ()
Additional contact information
Yiling Chen: Yahoo! Research, 45 West 18th Street, 6th Floor, New York, NY 10011, USA
Chao-Hsien Chu: School of Information Systems, Singapore Management University, 80 Stamford Road, Singapore 178902, Singapore
Tracy Mullen: College of Information Sciences and Technology, The Pennsylvania State University, University Park, PA 16802, USA

New Mathematics and Natural Computation (NMNC), 2006, vol. 02, issue 03, 281-297

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 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (2)

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DOI: 10.1142/S179300570600052X

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