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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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Public Corporations

Public Corporations

Chapter:
(p.194) Chapter 7 Public Corporations
Source:
Predictocracy
Author(s):

Michael Abramowicz

Publisher:
Yale University Press
DOI:10.12987/yale/9780300115994.003.0007

This chapter explores ways in which public corporations might harness the benefits of prediction markets. A major challenge addressed by corporate law scholarship is that agency costs sometimes might lead managers to make decisions that advance their own interests rather than those of the shareholders. A prediction market can be seen as a mechanism that can help counter those agency costs, and it may be more effective than some alternative mechanisms, such as shareholder voting. This chapter explores a range of potential applications of prediction markets. It argues that a more powerful Hollywood Stock Exchange might not merely predict movie success but might also be used to determine which movies would be made. The chapter explains that prediction markets might promote the flow of information, both to managers and to actual and potential shareholders, and can serve as a weak form of insider trading.

Keywords:   public corporations, prediction markets, agency, managers, shareholders, Hollywood Stock Exchange

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