I have created a “-Prediction Market Videos”- category in my “-Links”- page. I have listed there the InTrade and the Jed Christiansen webspots at YouTube.
Any other link(s) to suggest, folks?
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Jed Christiansen: What is a prediction market?
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Jed Christiansen: How can I use a prediction market for my business?
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Our good doctor Emile Servan-Schreiber of NewsFutures (some time ago):
[…] create a “Prediction Market” label that we could use to differentiate our products and our approach from the growing number of “-wisdom of crowds”- barbarians (eg, blubet, guessnow, etc.) who are shamelessly exploiting the “-prediction market”- brand even while their offerings have little resemblance to such a thing. […]
Maybe not such a bad idea. But who would define the prediction markets, who would apply this prediction market label, and would the media care about all that??
The mainstream media continue to show interest for Jason Ruspini’-s tax futures markets.
Previously: Video.
Via Mat Fogarty of Xpree (an innovative firm providing software for enterprise prediction markets), the Scientific American magazine on prediction markets –-”-When Markets Beat the Polls”-.
Ask me by e-mail to get a copy of the PDF file.
Abstract:
When Markets Beat the Polls– March 2008- Scientific American Magazine- by Gary Stix- 8 Page(s)
In late March 1988 three economists from the University of Iowa were nursing beers at a local hangout in Iowa City, when conversation turned to the news of the day. Jesse Jackson had captured 55 percent of the votes in the Michigan Democratic caucuses, an outcome that the polls had failed to intimate. The ensuing grumbling about the unreliability of polls sparked the germ of an idea. At the time, experimental economics–-in which economic theory is tested by observing the behavior of groups, usually in a classroom setting–-had just come into vogue, which prompted the three drinking partners to deliberate about whether a market might do better than the polls.
A market in political candidates would serve as a novel way to test an economic theory asserting that all information about a security is reflected in its price. For a stock or other financial security, the price summarizes, among other things, what traders know about the factors influencing whether a company will achieve its profit goals in the coming quarter or whether sales may plummet. Instead of recruiting students to imitate buyers or sellers of goods and services, as in other economics experiments, participants in this election market would trade contracts that would provide payoffs depending on what percentage of the vote George H. W. Bush, Michael Dukakis or other candidates received.
Robin Hanson had more.
Markets offer us a potentially useful tool for predicting earthquakes. Imagine the San Andreas fault divided into segments, each of which carries a price based on the present discounted disvalue of a future quake. That price would reflect both a quake’-s place in time and its place on the Richter scale. Such a market in quake claims would probably generate some useful–-even lifesaving–-data. If sufficiently thick, it might offer hedging, too.
I’-ve not yet found that sort of quake market. Has any of you? If none exists, at least one should! Plenty of people and institutions would love to know more about earthquakes. Some of them would gladly support an earthquake market, I’-d bet. There remain some legal risks, granted, but I think I’-ve got a good hack for those. (Long story short: independent contractor researchers paid a base salary for making trades and winning bonuses for correct predictions.)
One nice thing about a quake market: Done right, it would generate powerfully positive externalities, benefiting even those who do not trade on the market. Imagine a map of the San Andreas fault, the price of each tradable segment illustrated by color coding or line thickness. One glance at that picture, and you would know whether it was time to relax, double-check your emergency kit, or head for the hills.
[Crossposted to Agoraphilia.]
Jeremy:
This site has more than you need to know about futures markets and the subtle point that they don’t predict but rather capture what people think will happen. Clear?
My dual strategy is paying off.
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[*] Overcoming Bias and Freakonomics are not prediction market blogs. And they didn’-t take my challenge to comment on the BetFair Starting Prices.
Except for that stupid smirk, not terrible for my first t.v. appearance.
It’-s 23:45 minutes in, here.
Afterwards, I met some of the guys from CNBC’-s Fast Money, who were great. I wouldn’-t mind doing it again.
Thus, the Nokia executives are pretty secretive about it. Bad luck for them, there’-s a group blog on the Web that specializes on prediction markets and that digs deep. 
So, here’-s an inkling into Nokia’-s enterprise prediction markets. The material was gathered from the World-Wide Web.
Maximilian Kammerer (Nokia’-s Vice President CMO Global Customer Care) – (PDF file):
What technologies did you need for real-time information feedback among people working in 120 different countries?
KAMMERER: One sample element within the whole system is the Nokia Care Information Market. Like a stock exchange with a Web-based platform, people deal with information derivatives. They wager on the success of new strategies, innovations, solutions and projects. If their estimates change—the prices change. The price index creates an enormous transparency. The effectiveness of information markets relies on the fact that the collective intelligence is higher then every individual intelligence—even than that at management levels. Having understood that, our strategic decision-making is no longer purely based on historical data or expert opinions but on the intelligence of all concerned.
Translation: Nokia is embracing James Surowiscki’-s wisdom of crowds. It’-s my understanding that it’-s the first time that that is said publicly by Nokia.
Now, let’-s dig a bit. This interview was posted on the website of “-1492“-, a consulting firm from Austria. Now, the good question is…- Which prediction market firm does supply “-1492″- with software and advice (which are resold to Nokia)? Suspense, suspense.
ANSWER: GEXID
Congrats to them.
As everybody knows in the field, prediction market firms very often have to sign NDAs before undertaking clients, which means that the public gets to know the names of those firms only when their clients allow this information to be published.
APPENDIX: Nokia is also listed as a client on Consensus Point’-s website.
Jason Ruspini, interviewed by Bloomberg:
Taxes “-are the largest class of risk people don’-t hedge,”- said Jason Ruspini, a New York hedge fund analyst who established the market, which began trading last week. “-Hopefully this year, with this election, there will be kind of an increased interest in this kind of thing.”- […] “-If Democrats are perceived as having a greater chance to get in the White House these tax contracts will go up,”- said Ruspini, who declined to identify his employer because the market he created isn’-t related to it. “-If McCain is elected they won’-t go up as much.”- […] Right now, the market exists only for the top marginal income tax rate. Ruspini said he plans to have secondary markets based on Social Security taxes and whether Congress can restrain the alternative minimum tax from raising levies on tens of millions of households. […] “-This is such a young field at this point,”- Ruspini said. “-Ten years from now, it’-s going to be a huge market. Whenever you have a contract where there’-s a lot of hedging utility, that tends to be a successful contract in the long run.”- […]
Congrats to Jason.
Go read the whole piece.
Previously: Tax Futures, “In Real Life” – by Jason Ruspini
Over the years there has been a lot of talk in this community about how prediction markets could be “-socially valuable”-. The discussion has often focused on the value of the information and/or predictions that the markets could generate, especially in a political context. Election-based decision markets a la Hanson are thus being held as the highest form of “-socially valuable”- prediction markets, and our best bullet aimed at a possible legalization of real-money markets.
However, just in time for Super Tuesday, I’-ve finally stumbled onto a totally different, and to my mind much more compelling societal benefit of political prediction markets (the real-money kind, like Intrade or Bet2Give). It’-s based on sound science, but has nothing to do with information, prediction accuracy, or the usual economics/decision-support suspects:
Participating in political prediction markets may be good for your health by virtue of reducing the killer stress caused by aggravating political outcomes over which you have very little control as a voter. In essence, you can hedge against despair, and thus reduce your political “-learned helplessness”-. I present this idea more completely, and the science behind it, in NewsFutures’- blog.
The interesting thing is that it should be relatively easy to test, say as a senior psychology research project, but the consequences of a positive result would be huge. Who could argue against the legalization of something that saves lives?
So let the word go forth on this day that if there’-s someone out there who would like to run such an experiment, the industry would gladly help out, either through the PMIA, or through individual stake holders like NewsFutures. And if you’-re in an economics department, please reach out across the social sciences aisle to your psychology colleagues and spread the word! This, by the way, is especially aimed at Justin Wolfers who happens to share the U. Penn campus with Martin Seligman, the founder of Positive Psychology himself, and the inventor of “-learned helplessness”-.