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Revision as of 07:48, 25 May 2010 (view source)

Revision as of 08:06, 25 May 2010 (view source)

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Prediction Markets cover a wide range of topics. These may be in the areas of '''[[:Category:Current or recreation events|Current or recreation events]]''', '''[[:Category:Business topics|Business topics]]''', '''[[:Category:Policy issues|Policy issues]]''', '''[[:Category:Synthetic events|Synthetic events]]''' etc.

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== In what setting are ~~they~~ used? ==

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== In what setting are markets used? ==

Prediction markets are implemented in a variety of environments

* '''[[:Category:Public domain markets|Public domain]]''' – open to the general public. May take the form of stand-alone web-sites e.g. [[Intrade]] or add-ons to larger web-sites e.g. [http://www.ftpredict.com/ FTPredict] of the Financial Times.

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* '''[[:Category:Field experiment|Field experiments]]''' – controlled experiments in real-world settings

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== ~~Online Markets and Platforms ==~~

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== How do Prediction Markets work? ==

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~~The [http://en.wikipedia.org/wiki/Prediction_market~~ Prediction Markets entry] in Wikipedia provides an extensive list of operating markets, categorized according real-money and play-money markets. It also lists a wide range of proprietary as well as open-source prediction markets software. The intention in this section is to mention only markets and platforms that can contribute in some way to deeper understanding of prediction markets and assist in the teaching and research activity.

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~~=== Iowa Electronic Market (IEM)===~~

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[http://www.biz.uiowa.edu/iem/ Iowa Electronic Market (IEM)] is a real-money, non-profit market, operated by the Henry B. Tippie College of Business at the University of Iowa as part of its research and teaching mission. IEM was first opened on 1988 and is since known and widely cited mainly for its political prediction markets. Some of its markets are open to the public while others are available for classroom traders only. For the latter, the IEM web-site also includes [http://www.biz.uiowa.edu/iem/classroom/ course modules, sample assignments] and reference to many [http://www.biz.uiowa.edu/iem/archive/references.html research papers]. True to its research mission, IEM has opened its [http://www.biz.uiowa.edu/iem/archive/historicaldata.cfm historical trading data] for research activity and consequently it is widely cited in academic papers as well as by the media.

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~~=== Zocalo - an open-source prediction markets platform ===~~

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[http://zocalo.sourceforge.net/ Zocalo] is an open-source toolkit for building prediction markets. The project is lead by [http://mydruthers.com/ Chris Hibbert] and supported by [http://www.commerce.net/ CommerceNet]. The software was first released on July 2006 on SourceForge.net and there have been ongoing updates since. Hibbert's short-term plan is to support experimental markets in economic labs, at a later stage support internal pilot markets to businesses and for the long-term deploy public markets with partners. Currently it is in used by George Manson University (GMU) to experiment whether manipulators affect the market price. Hibbert is looking for collaboration and the software can be [http://sourceforge.net/projects/zocalo/ downloaded] from the Zocalo project page at SourceForge.net.

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~~== How do they~~ work? ==

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Prediction Markets differ in their internal design, operational model and structure of assets. In this section we will provide an overview and references for more detailed information.

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=== Trading currency ===

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~~The currency that is used for trade execution~~ may be:

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Trading may be executed through the use of '''[[:Category:Real-money|Real-money]]''', i.e. trader’s money or play-money with a well defined monetary exchange rate, or '''[[:Category:Play-money|Play-money]]''', which is not directly tied to the final reward.

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* '''[[:Category:Real-money|Real-money]]''' – trader’s money or play-money with a well defined monetary exchange rate.

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* '''[[:Category:Play-money|Play-money]]''' – which is not directly tied to the final reward.

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=== Trading funds ===

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* '''[[:Category:Initial securities endowment|Initial securities endowment]]''' – traders' accounts are initialized with a number of securities.

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=== Market size ===

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=== Market size and duration ===

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the number of '''active''' traders during market activity period:

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The market size is defined by the number of ''active'' traders during market activity period. This may range from '''[[:Category:Small size markets|small]]''', 15 or less, through '''[[:Category:Medium size markets|medium]]''' – 15 – 50 traders, to '''[[:Category:Large markets|large]]''' – larger than 50, common in public markets but can also be found in corporate settings

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* '''[[:Category:Small size markets|~~Small~~]]''' ~~–15~~ or less ~~traders~~, ~~usually found in laboratory experiments.~~

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* '''[[:Category:Medium size markets|~~Medium~~]]''' – 15 – 50 traders, ~~expected in corporate environment and field experiments~~

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* '''[[:Category:Large markets|~~Large~~]]''' – larger than 50, common in public markets but can also be found in corporate settings

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~~=== Market duration ===~~

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Markets should be open as long as new information streams in, whether information that is exogenous to the market or information that is inferred from market price, and as long as the actual outcome is yet unknown.

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~~The market length can~~ be arbitrarily be defined as:

+

Markets should be open as long as new information streams in, whether information that is exogenous to the market or information that is inferred from market price, and as long as the actual outcome is yet unknown. Here their duration is arbitrarily defined as:

* '''[[:Category:Short duration|Short]]''' – does not exceed one day, in a laboratory setting usually lasts a few minutes

* '''[[:Category:Medium duration|Medium]]''' – a few days, does not exceed one week

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* '''[[:Category:Variable duration|Variable]]''' – the market closing date is defined ad-hoc, and is dictated by the topic of the market and the external events which affect the subject of trade.

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=== Interaction ===

+

=== Interaction means ===

Does the market platform or trading procedure enable complementary information exchange between traders?

* '''[[:Category:No interaction|No interaction]]''' – platform does not facilitate interaction among traders. Traders are instructed to refrain from off platform interaction.

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@@ Line 19: / Line 19: @@
 Prediction Markets cover a wide range of topics. These may be in the areas of '''[[:Category:Current or recreation events|Current or recreation events]]''', '''[[:Category:Business topics|Business topics]]''', '''[[:Category:Policy issues|Policy issues]]''', '''[[:Category:Synthetic events|Synthetic events]]''' etc.
-== In what setting are they used? ==
+== In what setting are markets used? ==
 Prediction markets are implemented in a variety of environments
 * '''[[:Category:Public domain markets|Public domain]]''' – open to the general public. May take the form of stand-alone web-sites e.g. [[Intrade]] or add-ons to larger web-sites e.g. [http://www.ftpredict.com/ FTPredict] of the Financial Times.
@@ Line 26: / Line 26: @@
 * '''[[:Category:Field experiment|Field experiments]]''' – controlled experiments in real-world settings
-== Online Markets and Platforms ==
+== How do Prediction Markets work? ==
-The [http://en.wikipedia.org/wiki/Prediction_market Prediction Markets entry] in Wikipedia provides an extensive list of operating markets, categorized according real-money and play-money markets. It also lists a wide range of proprietary as well as open-source prediction markets software. The intention in this section is to mention only markets and platforms that can contribute in some way to deeper understanding of prediction markets and assist in the teaching and research activity.
-=== Iowa Electronic Market (IEM)===
-[http://www.biz.uiowa.edu/iem/ Iowa Electronic Market (IEM)] is a real-money, non-profit market, operated by the Henry B. Tippie College of Business at the University of Iowa as part of its research and teaching mission. IEM was first opened on 1988 and is since known and widely cited mainly for its political prediction markets. Some of its markets are open to the public while others are available for classroom traders only. For the latter, the IEM web-site also includes [http://www.biz.uiowa.edu/iem/classroom/ course modules, sample assignments] and reference to many [http://www.biz.uiowa.edu/iem/archive/references.html research papers]. True to its research mission, IEM has opened its [http://www.biz.uiowa.edu/iem/archive/historicaldata.cfm historical trading data] for research activity and consequently it is widely cited in academic papers as well as by the media.
-=== Zocalo - an open-source prediction markets platform ===
-[http://zocalo.sourceforge.net/ Zocalo] is an open-source toolkit for building prediction markets. The project is lead by [http://mydruthers.com/ Chris Hibbert] and supported by [http://www.commerce.net/ CommerceNet]. The software was first released on July 2006 on SourceForge.net and there have been ongoing updates since. Hibbert's short-term plan is to support experimental markets in economic labs, at a later stage support internal pilot markets to businesses and for the long-term deploy public markets with partners. Currently it is in used by George Manson University (GMU) to experiment whether manipulators affect the market price. Hibbert is looking for collaboration and the software can be [http://sourceforge.net/projects/zocalo/ downloaded] from the Zocalo project page at SourceForge.net.
-== How do they work? ==
 Prediction Markets differ in their internal design, operational model and structure of assets. In this section we will provide an overview and references for more detailed information.
@@ Line 53: / Line 44: @@
 === Trading currency ===
-The currency that is used for trade execution may be:
+Trading may be executed through the use of '''[[:Category:Real-money|Real-money]]''', i.e. trader’s money or play-money with a well defined monetary exchange rate, or '''[[:Category:Play-money|Play-money]]''', which is not directly tied to the final reward.
-* '''[[:Category:Real-money|Real-money]]''' – trader’s money or play-money with a well defined monetary exchange rate.
-* '''[[:Category:Play-money|Play-money]]''' – which is not directly tied to the final reward.
 === Trading funds ===
@@ Line 64: / Line 53: @@
 * '''[[:Category:Initial securities endowment|Initial securities endowment]]''' – traders' accounts are initialized with a number of securities.
-=== Market size ===
+=== Market size and duration ===
-the number of '''active''' traders during market activity period:
+The market size is defined by the number of ''active'' traders during market activity period. This may range from '''[[:Category:Small size markets|small]]''', 15 or less, through '''[[:Category:Medium size markets|medium]]''' – 15 – 50 traders, to '''[[:Category:Large markets|large]]''' – larger than 50, common in public markets but can also be found in corporate settings
-* '''[[:Category:Small size markets|Small]]''' –15 or less traders, usually found in laboratory experiments.
-* '''[[:Category:Medium size markets|Medium]]''' – 15 – 50 traders, expected in corporate environment and field experiments
-* '''[[:Category:Large markets|Large]]''' – larger than 50, common in public markets but can also be found in corporate settings
-=== Market duration ===
-Markets should be open as long as new information streams in, whether information that is exogenous to the market or information that is inferred from market price, and as long as the actual outcome is yet unknown.
-The market length can be arbitrarily be defined as:
+Markets should be open as long as new information streams in, whether information that is exogenous to the market or information that is inferred from market price, and as long as the actual outcome is yet unknown. Here their duration is arbitrarily defined as:
 * '''[[:Category:Short duration|Short]]''' – does not exceed one day, in a laboratory setting usually lasts a few minutes
 * '''[[:Category:Medium duration|Medium]]''' – a few days, does not exceed one week
@@ Line 79: / Line 62: @@
 * '''[[:Category:Variable duration|Variable]]''' – the market closing date is defined ad-hoc, and is dictated by the topic of the market and the external events which affect the subject of trade.
-=== Interaction ===
+=== Interaction means ===
 Does the market platform or trading procedure enable complementary information exchange between traders?
 * '''[[:Category:No interaction|No interaction]]''' – platform does not facilitate interaction among traders. Traders are instructed to refrain from off platform interaction.