Andreas Gräfe

Prediction markets versus alternative methods. Empirical tests of accuracy and acceptability

Karlsruhe: Fakultät für Wirtschaftswissenschaften der Universität Karlsruhe(TH) 2009
[Volltext/pdf / 1.826 kb]   [Abstract]   [Introduction]

CONTENTS

CONTENTS VII
FIGURES XI
TABLES XIII
ABBREVIATIONS XV
1 INTRODUCTION 1
  1.1 Defining the Scope of the Work 4
  1.2 Motivation 6
  1.2.1 Lack of empirical evidence 7
  1.2.2 Cognitive barriers 8
  1.2.3 Organizational barriers 9
  1.3 Research Questions 11
  1.4 Overview and Structure 16
  1.5 Related Presentations and Publications 18
2 PREDICTION MARKETS 21
  2.1 The Price System as Information Aggregator 21
  2.2 The Concept of Prediction Markets 23
  2.3 Evidence on Accuracy 26
  2.3.1 Election forecasting 26
  2.3.2 Sports forecasting 27
  2.3.3 Business forecasting 28
  2.3.4 Other applications 29
  2.3.5 Summary 30
  2.4 Promising Features 30
  2.4.1 Enhancing quantitative forecasting methods 30
  2.4.2 Continuous and real-time information aggregation 31
  2.4.3 Motivating information revelation 31
  2.4.4 Motivating participation 32
  2.4.5 Scalability and cost-efficiency 33
  2.4.6 Participatory regulation 33
3 RESEARCH METHODOLOGY 35
  3.1 Group Techniques for Information Aggregation 35
  3.1.1 Face-to-face meetings 35
  3.1.2 Nominal group technique 37
  3.1.3 The Delphi method 38
  3.2 Group Judgment Tasks 42
  3.3 TechForX – A Field Experiment on Long-term Forecasting 44
  3.3.1 Study design 44
  3.3.2 Task type 46
  3.3.3 Participants 50
  3.3.4 Incentive mechanism 51
  3.3.5 Materials and procedures 52
  3.3.6 Participation statistics 52
  3.3.7 Market inefficiencies 54
  3.4 A Laboratory Experiment on Group Technique Comparison 56
  3.4.1 Study design 56
  3.4.2 Task type 57
  3.4.3 Participants 60
  3.4.4 Incentive mechanism 60
  3.4.5 Materials and procedures 60
4 VALIDITY OF PREDICTION MARKETS FOR LONG-TERM FORECASTING 65
  4.1 Related Work 65
  4.2 Hypotheses 67
  4.3 Results 68
  4.4 Discussion 69
  4.5 Summary 70
5 THE VALUE OF EXPERTS IN PREDICTION MARKETS 71
  5.1 Related work 71
  5.2 Hypotheses 73
  5.3 Results 75
  5.3.1 Relative validity of students’ and experts’ results 75
  5.3.2 Confidence of experts and students compared 75
  5.4 Discussion 78
  5.5 Summary 81
6 RELATIVE ACCURACY OF PREDICTION MARKETS ON A QUANTITATIVE JUDGMENT TASK 83
  6.1 Related Work 83
  6.2 Hypotheses 85
  6.3 Results 86
  6.4 Discussion 89
  6.4.1 Method accuracy vs. question difficulty 89
  6.4.2 Method accuracy vs. question difficulty 91
  6.5 Summary 93
7 PERCEPTIONS OF PREDICTION MARKETS 95
  7.1 Related Work 96
  7.2 Hypotheses 96
  7.3 Results 97
  7.3.1 Ratings of the group 97
  7.3.2 Ratings of the group process 98
  7.4 Discussion 99
  7.5 Summary 101
8 ADVICE-TAKING FROM PREDICTION MARKETS, MEETINGS, AND THE DELPHI METHOD 103
  8.1 JAS design 104
  8.2 Related Work 105
  8.3 Hypotheses 106
  8.4 Study Design 108
  8.5 Results 109
  8.5.1 Frequency and magnitude of advice discounting 110
  8.5.2 Advice discounting and accuracy 111
  8.5.3 Correlations 116
  8.6 Discussion 118
  8.7 Summary 120
METHODOLOGICAL APPENDIX 135
  M.1 Appendix to the TechForX Field Experiment 135
  M.1.1 Short instructions for participants 135
  M.1.2 Full tutorial 138
  M.1.3 Classification of time horizons 145
  M.2 Appendix to the Laboratory Experiment 146
  M.2.1 Instructions (NGT) 146
  M.2.2 Revealing prior individual estimates (NGT) 148
  M.2.3 Revealing group estimates (NGT and FTF) 149
  M.2.4 Revealing posterior estimates and ex post evaluation (NGT) 150
TECHNICAL APPENDIX 153
  T.1 Calculation of Error Measure 153
  T.2 Remarks to Statistical Analyses 154
SUPPORTING ONLINE MATERIAL 155
BIBLIOGRAPHY 157
AUTHOR INDEX 169

 

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