• Table of Contents
    • Abstract
    • Keywords
    • Article
      • Types of prediction market
      • Prediction markets in theory: information aggregation
      • Prediction markets in practice
      • Economic analysis of prediction market prices
      • Conclusion
    • See Also
    • Bibliography
    • How to cite this article

prediction markets

Justin Wolfers and Eric Zitzewitz
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by Steven N. Durlauf and Lawrence E. Blume
Back to top

Abstract

Prediction markets, sometimes referred to as ‘information markets’, ‘idea futures’ or ‘event futures’, are markets where participants trade contracts whose payoffs are tied to a future event, thereby yielding prices that can be interpreted as market-aggregated forecasts. This article summarizes the recent literature on prediction markets, highlighting both theoretical contributions that emphasize the possibility that these markets efficiently aggregate dispersed information, and the lessons from empirical applications which show that market-generated forecasts typically outperform most moderately sophisticated benchmarks. Along the way, we highlight areas ripe for future research.
Back to top

Keywords

Back to top

Article

Back to top

How to cite this article

Wolfers, Justin and Eric Zitzewitz. "prediction markets." The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008. The New Palgrave Dictionary of Economics Online. Palgrave Macmillan. 30 September 2014 <http://www.dictionaryofeconomics.com/article?id=pde2008_P000340> doi:10.1057/9780230226203.1328

Download Citation:

as RIS | as text | as CSV | as BibTex