TY  - JOUR
AU  - Wolfers,Justin
AU  - Zitzewitz,Eric
TI  - Prediction Markets
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10504
PY  - 2004
Y2  - May 2004
UR  - http://www.nber.org/papers/w10504
L1  - http://www.nber.org/papers/w10504.pdf
N1  - Author contact info:
Justin Wolfers
Department of Economics
University of Michigan
611 Tappan St
Lorch Hall #319
Ann Arbor, MI 48104
Tel: 734-764-2447
E-Mail: jwolfers@umich.edu

Eric Zitzewitz
Department of Economics
Dartmouth College
6106 Rockefeller Hall
Hanover, NH 03755
Tel: 603/646-2891
Fax: 603/646-2122
E-Mail: eric.zitzewitz@dartmouth.edu
M2  - featured in NBER digest on 2004-11-01
AB  - We analyze the extent to which simple markets can be used to aggregate disperse information into efficient forecasts of uncertain future events. Drawing together data from a range of prediction contexts, we show that market-generated forecasts are typically fairly accurate, and that they outperform most moderately sophisticated benchmarks. Carefully designed contracts can yield insight into the market's expectations about probabilities, means and medians, and also uncertainty about these parameters. Moreover, conditional markets can effectively reveal the market's beliefs about regression coefficients, although we still have the usual problem of disentangling correlation from causation. We discuss a number of market design issues and highlight domains in which prediction markets are most likely to be useful.
ER  -