The Real Power of Artificial Markets

  title={The Real Power of Artificial Markets},
  author={David M. Pennock and Steve Lawrence and C. Lee Giles and Finn {\AA}rup Nielsen},
  pages={987 - 988}
Assessing the probabilities of future events is a problem often faced by science policymakers. For example, CERN, the European laboratory for particle physics, recently had to judge whether the probability of discovering a Higgs boson was high enough to justify extending the operation of its collider (see Science, 22 Sept., p. 2014 and 29 Sept., p. 2260). At the Foresight Exchange (FX) Web site (http://www., traders can actually bet on the outcomes of unresolved scientific… Expand
Manipulating political stock markets: A field experiment and a century of observational data
Political stock markets have a long history in the United States. Organized prediction markets for Presidential elections have operated on Wall Street (1880-1944), the Iowa Electronic MarketExpand
This is the first research to test potential new product concepts using virtual markets and the first to validate such an approach using eight years of stated-choice and longitudinal revealed preference data, and reveals that the market prices of securities designed to represent product concepts are remarkably efficient, accurate, and internally consistent measures of preferences, even when conducted with relatively few traders. Expand
Pricing combinatorial markets for tournaments
This paper derives a polynomial-time algorithm for a restricted betting language based on a Bayesian network representation of the probability distribution for single-elimination tournaments, and believes that this betting language is the first for combinatorial market makers that is both useful and tractable. Expand
Price dynamics in political prediction markets
This work studies the return dynamics of the oldest, most data-rich prediction markets, the Iowa Electronic Presidential Election “winner-takes-all” markets and proposes a dynamic binary option model that captures all features of the empirical data and can potentially provide a tool with which one may extract true information events from a price time series. Expand
18 Information ( in ) efficiency in prediction markets
This chapter examines a new class of markets at the intersection of trad· itional betting and traditional financial markets. We call these 'prediction markets'. Like both financial and bettingExpand
Incentives in Prediction Markets
Prediction markets are powerful devices to forecast outcomes of future events. Information from the public domain is gradually absorbed into contract prices that directly translate into likelihoodsExpand
Managing Financial Risk Via Prediction Markets
  • R. Ray
  • Economics
  • The Journal of Investing
  • 2012
This article examines the recent innovation of prediction markets, a new genre of financial markets, and how such markets can be utilized to assess, manage, and plan for risks of all types, includingExpand
Log-optimal economic evaluation of probability forecasts
Summary.  The commercial test of an expert's probability assessments is not that they are accurate in an abstract sense, but that they yield financial returns to decision makers. From thisExpand
Securities Trading of Concepts (STOC) (Running title: SECURITIES TRADING OF CONCEPTS (STOC))
Market prices are well known to efficiently collect and aggregate diverse information regarding the economic value of goods and services, particularly for financial securities. We propose a novelExpand
Theoretical Investigation of Prediction Markets with Aggregate Uncertainty
Much evidence supports that financial markets have the ability to aggregate information. When tied to a random variable, a financial market can forecast the value of the random variable. It thenExpand


Rational Expectations and the Aggregation of Diverse Information in Laboratory Security Markets
The study explores the information aggregation properties of experimental markets. A fully-revealing rational expectations equilibrium exists in the competitive model of each of the markets studied.Expand
Wishes, expectations and actions: a survey on price formation in election stock markets
Abstract With error-prone and biased individual traders, can markets aggregate trader information and produce efficient outcomes? We review election stock market evidence that suggests this doesExpand
Could gambling save science? Encouraging an honest consensus
Abstract The pace of scientific progress may be hindered by the tendency of our academic institutions to reward being popular rather than being right. A market‐based alternative, where scientists canExpand
Journal of economic behavior and organization: special issue on heterogeneous interacting agents in financial markets
An adjustable clamp for controlling the flow of fluid through a flexible tubing having deformable walls has an elongated, externally threaded body having an axial bore through which the tubingExpand
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  • 1988