Are Prediction Markets More Accurate than Simple Surveys?
Foresight - The International Journal of Applied Forecasting, 2010 (19), 39-43.
A PREVIEW In this new installment of the prediction markets’ column, Andreas Graefe summarizes the evidence he has uncovered on whether the design and implementation of a prediction market is worth the extra costs and efforts involved compared to a simple survey of the judgment of key individuals.
KEY POINTS
- Simple surveys, in which individual forecasts are elicited and then averaged, can be an effective low-cost procedure, especially when the data are inadequate to develop statistical models.
- But simple surveys do not facilitate interaction and feedback among participants. Prediction markets provide this added dimension and give participants incentives to be accurate. The method can be particularly valuable for an organization whose forecasts need to be continually updated.
- I have summarized the key findings of five 5 studies that compare the accuracy of prediction markets to that of simple surveys. They reveal an advantage of prediction markets over simple surveys. This advantage increases when relevant information about the forecasting problem is unevenly distributed among people.
- However, you should be cautious with using prediction markets in situations in which judgment is generally of little value.
Click here for the full article.
A PREVIEW In this new installment of the prediction markets’ column, Andreas Graefe summarizes the evidence he has uncovered on whether the design and implementation of a prediction market is worth the extra costs and efforts involved compared to a simple survey of the judgment of key individuals.
KEY POINTS
- Simple surveys, in which individual forecasts are elicited and then averaged, can be an effective low-cost procedure, especially when the data are inadequate to develop statistical models.
- But simple surveys do not facilitate interaction and feedback among participants. Prediction markets provide this added dimension and give participants incentives to be accurate. The method can be particularly valuable for an organization whose forecasts need to be continually updated.
- I have summarized the key findings of five 5 studies that compare the accuracy of prediction markets to that of simple surveys. They reveal an advantage of prediction markets over simple surveys. This advantage increases when relevant information about the forecasting problem is unevenly distributed among people.
- However, you should be cautious with using prediction markets in situations in which judgment is generally of little value.
Click here for the full article.
