Today, Michael Abramowicz’s book Predictocracy is published. This is my blurb for the cover: Decision markets will one day revolutionize governance, both public and private, and Michael Abramowicz”s
I just saw this linked from Marginal Revolution.
Can anyone suggest a good "guidebook" to using the current prediction market tools available in the business world? Would "Predictocracy" be it? I can read about theory, which is great and all, but I'm not sure how the current markets accessible to ordinary people reflect the theory. Specifically I am referring to legal issues associated with gambling, and how most accessible markets (like Inkling) don't use real money.
I am interested in using prediction markets to assist in forecasting the potential demand for a product, but I'm uncertain what the best way to go about it would be. Since the product is not the sort of thing ordinary people people get exited over or have even heard of before, I'm wondering how well play-money markets would work. I can see why a "Hollywood Stock Exchange" would be successful without real money, but something dealing with an esoteric good might not. Adverse selection seems like it may be a problem in this case, because those with the incentives to bet only play money might not be the sort of people with the knowledge the business is looking for?
A minor quibble on the post above, but I would say most academics are able to use more rigor in their decisions because they involve many less variables than most business decisions, especially when profit is not the only consideration. Many academic papers present a problem simplified to the point where an optimal solution can be found, whereas the state space of business problems is so much larger that imperfect heuristics must be employed. But then I am sure Robin knows far more than I on this subject...