Prediction markets

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My polished presentation on the problems of prediction markets.

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Prediction markets

  1. 1. Domas Monkus domas@nous.lt Nous www.nous.lt PREDICTION MARKETS INTRO AND PROBLEMS D
  2. 2. Who are the winners of Democamp? ● Polls ● Expert opinions ● Statistical models ● Bets
  3. 3. Who are the winners of Democamp? - “Who, do you think, will win?” - “My team, of course!” Opinions are biased. So are the polls.
  4. 4. Prediction markets ● Iowa Electronic Markets - 1988 ● „Wisdom of the crowds“ (J.Surowiecki, 2004)
  5. 5. Prediction markets ● Stocks are tied to events ● Stock payouts depend on the outcomes ● Stock prices correlate with the probabilities
  6. 6. Prediction markets: an example ● Democamp: 11 startups ● 11 possible winners ● 11 stocks in the Democamp market ● The winning team's stock will produce a payout (profit)
  7. 7. Prediction markets The benefit? Accuracy! Iowa Electronic Markets: 2008 US President election Democrats Republicans
  8. 8. Prediction markets Why? ● „Wisdom of the crowds“ (J.Surowiecki) ● Incentives for information discovery and truthful revelation of beliefs ● Efficient market hypothesis
  9. 9. Prediction markets – who's in? ...
  10. 10. Prediction markets – who's using them? Demokratai Respublikonai
  11. 11. What's the problem? Demokratai Respublikonai ● Users ● Usability
  12. 12. Why facebook? A channel for: ● User acquisition ● User activation ● User retention ● User referrals High trading volumes and thus a large user base is necessary for forecasting accuracy.
  13. 13. Usability Financial and stock market terms are difficult for most people. Yet they are the essence of prediction markets. So how much of the “market” can you hide before you start to lose the “prediction”?
  14. 14. The future ● Sell the service (SaaS) ● Sell the information ● In-game-purchases
  15. 15. Thank you

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