Prediction Markets as Forecasting Tool in Decision Processes

Beschreibung

Inaugural-Dissertation zur Erlangung des akademischen Grades eines Doktors der Wirtschafts- und Sozialwissenschaften (Dr. rer. pol.) der Friedrich-Alexander-Universität Erlangen-Nürnberg. - Prediction markets are an innovative forecasting method that has proven high prediction accuracy in many areas. In prediction markets, users trade virtual stocks whose payoffs are tied to the outcome of uncertain future events. They will sell virtual stocks in case they consider them to be overvalued and buy stocks if they consider them to be undervalued. As a result of the competitive dynamic in the market, the trading price reflects the traders' aggregated beliefs about the outcome of the future event Thus, the trading price reflects a consensus prediction. This work examines the theory behind prediction markets as forecasting technique and derives key advantages and limitations of the method. The main scientific contributions comprise two empirical studies. The first study analyzes the accuracy of prediction markets by comparing the forecasts of a real-money prediction market with a large survey. The second study focuses on the level of trust participants put into prediction market forecasts. Based on a series of market experiments, it identifies influencing factors on the participants' perceived trust in the method. This book is particularly suited for scholars studying decision and forecasting processes in general and prediction markets in particular. It is also suited for practitioners planning to apply prediction markets for corporate forecasting topics.

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Thomas Seemann

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