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PredictocracyMarket Mechanisms for Public and Private Decision Making$
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Michael Abramowicz

Print publication date: 2008

Print ISBN-13: 9780300115994

Published to Yale Scholarship Online: October 2013

DOI: 10.12987/yale/9780300115994.001.0001

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(p.65) Chapter 3 Businesses

Michael Abramowicz

Yale University Press

This chapter introduces some possible applications of prediction markets for businesses. One problem that prediction markets might help businesses overcome is “optimism bias,” a tendency that people have to overestimate their chances of success on a particular project. Businesses currently have informal ways of overcoming such bias, but prediction markets might provide a new, decentralized technique. The chapter discusses a new means of structuring and subsidizing prediction markets that will be particularly useful where only a very small number of traders might have expertise in a particular area, a context that may be common in business settings, especially if businesses offer a wide range of prediction markets. The chapter discusses the experiences of some companies with prediction markets, including the danger that they could encourage sabotage. The chapter also presents a variety of potential applications, including prediction markets to assess the success of particular products and to provide information to consumers.

Keywords:   prediction markets, business, consumers, employees, bias

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