Prediction Markets: Distilling Collective Wisdom

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

Case Details:


Case Code : BSTR268 For delivery in electronic format: Rs. 300;
For delivery through courier (within India): Rs. 300 + Rs. 25 for Shipping & Handling Charges


Strategic Management, Innovation, Miscellaneous
Case Length : 14 Pages
Period : 1988-2007
Pub Date : 2007
Teaching Note : Not Available
Organization : --
Industry : Miscellaneous
Countries : Worldwide


Prediction markets are information aggregation mechanisms. Some analysts believe that prediction markets are more accurate in predicting future events than conventional forecasting tools and methods. The case discusses the mistrust that early thinkers had toward the intellectual capabilities of crowds and goes on to explain the changing view on prediction markets and their prognostic ability.

The case then explains the working of prediction markets. Some examples of prediction markets are given next. The case then discusses the efficacy of prediction markets in gathering information and the factors that operators should keep in mind before setting up prediction markets.

It also examines some criticisms, failures, and deficiencies of prediction markets. The case ends with a brief discussion on the future prospects for prediction markets.


The case has the following objectives

Understand the concept of prediction markets

Gain insights into the working of prediction markets and the situations in which they can be used effectively

Examine the efficacy of prediction markets as a forecasting tool

Analyze the future prospects of prediction markets

This case is meant for MBA/PGDBM students, and is designed to be a part of their Strategy and Business Management curriculum.


  Page No.
Introduction 1
What is a Prediction Market? 2
A Brief History of Prediction Markets 3
Some Examples of Prediction Markets 4
Do Prediction Markets work? 5
Criticisms 7
Outlook 10
Exhibits 11


Prediction Markets, Forecasting Tool, Collective Wisdom, Information aggregation mechanism, Decision making, SimExchange, Iowa Electronic Markets, Hollywood Stock Exchange, Probability, HP, Yahoo!

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