Manipulation and (Mis)trust in Prediction Markets

Lawrence Choo, Todd Kaplan and Ro’i Zultan ()
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Ro’i Zultan: Ben-Gurion University of the Negev, Beer-Sheva 84105, Israel

Management Science, 2022, vol. 68, issue 9, 6716-6732

Abstract: Markets are increasingly used as information aggregation mechanisms to predict future events. If policymakers and managers use markets to guide policy and managerial decisions, interested parties may attempt to manipulate the market in order to influence decisions. We study experimentally the willingness of managers to base decisions on market information under the shadow of manipulation. We find that when there are manipulators in the market, managers under-utilize the information revealed in prices. Furthermore, mere suspicion of manipulation erodes trust in the market, leading to the implementation of suboptimal policies—even without actual manipulation.

Keywords: prediction markets; policy; managerial decision making; experiment (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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http://dx.doi.org/10.1287/mnsc.2021.4213 (application/pdf)

Related works:
Working Paper: MANIPULATION AND (MIS)TRUST IN PREDICTION MARKETS (2020)
Working Paper: Manipulation and (mis)trust in prediction markets (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:68:y:2022:i:9:p:6716-6732

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