Infocenter - The prediction market

What is a prediction market?

In 1945 the Austrian economist and Nobel Prize Winner Friedrich August von Hayek developed a new concept. The theory is that prices are indicators of spread information. This is also true for a virtual stock exchange where the price basically reflects the aggregated knowledge of all traders - the prediction.

Prediction markets use the principle of information efficiency of markets by collecting spread information to aggregate prognoses with high accuracy. Beside questions around political developments there may also be asked relevant company key figures including significant trends.

Classical opinion polls usually ask people actively, asking them for their personal opinion (e.g. election intention). Prognoses are then developed based on this raw data. Prediction markets work differently: Only partizipating people affect the stock price and therefore the prognosis. The host is not taking a hand in the formation of prices. Prediction markets trust in the collective intelligence of the participants to receive reliable predictions of future events.

Political prediction markets

In political prediction markets campaigning parties and people are pictured as stocks. The stock price of each party mirrors the expectations of players about the outcome of the election. The prediction market is providing prognoses of events in real time.

Participation

Each participant receives a fix amount of stocks and a virtual amount of money in the beginning to start trading. The goal of the game is to maximize the assets through good prognoses and clever speculations. At the end of the game all stocks are bought back by the bank at the price of the official result of the predicted event (e.g. official election result).

Take part and register here.

You will find a short instruction for an easy entry here.

Tips and Tricks support you in trading and contain usefull hints for a good strategy.

Frequently used terms are defined in the prediction markets ABC.

History

The first prediction market was carried out in the USA in 1988. It predicted the election result ten times more precisely than well established polls. Since then such markets were operated in docens of countries. In Austria on every big election since 1994 a political prediction market took place.

pro:kons prediction markets

This prediction market is based on the prognosis module of pro:kons, a product of the company BDF-net Agentur für neue Medien GmbH. The product name stands for the german expressions of prognosis (PROgnose) and finding consensus (KONSensfindung). Pro:kons is also offering a software module to find consensus in decision making processes in organisations. Learn more about pro:kons on www.prokons.com.