The research paper highlights 4 key needs for an accurate prediction market
- Ability to aggregate information and knowledge from individuals
- Incentives to encourage active participation
- Feedback to participants based on market prices
- Anonymous trading
The results from the case study were quite positive. Acxiom Corporation was the test case and used the Inkling Markets software to host the market to predict 26 milestone events of an internal IT project. Two results jumped out at me. The market was 92% accurate on the milestone events (24 for 26) and had an 87% participation rate (33 participants). There was also a higher perceived level of collaboration as a project team, which had positive impact on the outcome.
The authors of the paper are Herbert Remidez, Jr. Ph.D. and Curtis Joslin from the University of Arkansas. Looking forward to seeing further output from the research.
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Another interesting prediction market that I recently ran across is one that shows the expectations around the housing crisis and when it will potentially abate -- http://www.icaprlfixing.com
The data can be manipulated to graphically show when investors in this market think house prices will again appreciate and the level of the maximum depreciation and when they expect that to occur. Even more interesting is to see how the expectations have changed over time (at least since the beginning of this market back in 3Q07). Fascinating stuff (at least to geeks like us!)
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