Prediction Markets as Decision Support Systems
Joyce E. Berg and Thomas A. Rietz
Information Systems Frontiers
Volume 5, Issue 1, pages 79�93, 2003
- Abstract
Valuations from 'prediction markets' reveal expectations
about the likelihood of events. 'Conditional prediction
markets' reveal expectations conditional on other events occurring.
For example, in 1996, the Iowa Electronic Markets (IEM)
ran markets to predict the chances that different candidates would
become the Republican Presidential nominee. Other concurrent
IEM markets predicted the vote shares that each party would receive
conditional on the Republican nominee chosen. Here, using
these markets as examples, we show how such markets could be
used for decision support. In this example, Republicans could
have inferred that Dole was a weak candidate and that his nomination
would result in a Clinton victory. This is only one example
of the widespread potential for using specific decision support
markets.
- Paper