TY  - JOUR
AU  - Wolfers,Justin
AU  - Zitzewitz,Eric
TI  - Prediction Markets in Theory and Practice
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12083
PY  - 2006
Y2  - March 2006
UR  - http://www.nber.org/papers/w12083
L1  - http://www.nber.org/papers/w12083.pdf
N1  - Author contact info:
Justin Wolfers
Business and Public Policy Department
Wharton School, University of Pennsylvania
3620 Locust Walk
Room 1456 Steinberg-Deitrich Hall
Philadelphia, PA 19104-6372
Tel: (215) 898-3013
Fax: (215) 898-7635
E-Mail: jwolfers@wharton.upenn.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
AB  - Prediction Markets, sometimes referred to as "information markets," "idea futures" or "event futures", are markets where participants trade contracts whose payoffs are tied to a future event, thereby yielding prices that can be interpreted as market-aggregated forecasts. This article summarizes the recent literature on prediction markets, highlighting both theoretical contributions that emphasize the possibility that these markets efficiently aggregate disperse information, and the lessons from empirical applications which show that market-generated forecasts typically outperform most moderately sophisticated benchmarks. Along the way, we highlight areas ripe for future research.
ER  -