Archive for 'Market Designs'
Conditional Prediction Markets
The Unwinding Approach
Prediction markets might not seem to be a suitable alternative to standards because they predict what will happen, not what will happen contingent on some choices or on some other events. A rule of enterprise liability imposed on automobile manufacturers for all automobile accidents will lead those manufacturers to make conditional assessments, considering […]
Normative Prediction Market
A normative prediction market can provide assessments not tainted by the ideology of current officials concerning questions that are purely normative. Such a market predicts a subjective assessment of an issue to be made at some point in the future. That point could be relatively near if there is some method for identifying a relatively […]
The Combinatorial Approach
So far, businesses that have taken advantage of prediction markets have made direct predictions of events relevant to their decision making, but as the above discussion implies, it may be far more useful to have prediction markets make forecasts that are contingent on the outcomes of particular decisions. We have already seen that conditional prediction […]
Self-Deciding Prediction Markets
Although reducing information asymmetries provides a partial solution to the problem of private decision maker information discussed above, an admittedly more radical alternative solution can essentially eliminate the problem altogether. That solution is to use prediction markets not merely as a means of providing information to decision makers or assessing decisions that they might make […]
Probabilistic Prediction Markets
One way of implementing prediction markets that conduct adjudication is to use a probabilistic prediction market. In a simple version of a probabilistic prediction market, a random number is drawn at the conclusion of the prediction market to determine whether what the market was forecasting will in fact be measured.18 Consider again, for example, the […]
Normative Probabilistic Prediction Markets
The above argument about precedent echoes an earlier theme: that predictive decision making strengthens the case for standards as compared to rules (see Chapter 5). One reason why our legal system has a rule-based approach to precedent is that we wish to reduce the effect of idiosyncratic decision making, to force decision makers to decide […]
The Text-Authoring Market
We have already seen that a prediction market can be used to approve a text. Predictive cost-benefit analysis, after all, predicts whether a regulation will have more benefits than costs, a condition that might count as constituting approval. This approach can be easily generalized. Given a requirement to approve a text for a particular purpose, […]
Incorporating Intensity of Preference
The above argument suggests that when policy options otherwise might cycle, the market-based legislature might choose among them in part on the basis of intensity of preference. It is plausible, however, that intensity of preference still will not matter as much in the […]
The Market Web
If prediction markets were to become commonplace, decision makers might link to them in their own analyses. For example, suppose that a corporation is deciding whether to build a new factory in a particular area. That decision might depend on such variables as future interest rates and geographic patterns. And so a decision maker might […]
Self-Resolving Prediction Markets
Normative prediction markets can be used to make virtually any type of decision, but so far they are not autonomous. They can function only by predicting some normative decision to be made in the future or at least one […]