Prediction Markets

Idea markets have been used effectively outside the corporate world for more than fifteen years. Since 1988, the Iowa Electronic Markets have predicted presidential election outcomes more accurately than traditional polls 75 percent of the time. Similarly, the Hollywood Stock Exchange has forecast Oscar winners more effectively than even the most seasoned media critics seven years running.

From Harvard Business Online

• Common Sense: Surprising new research shows that crowds are often smarter than individuals in Scientific American
• Info from Newsfutures.com that provides useful links and explanation.
• Market, market, on the wall. from Economist; 12/10/2005, Vol. 377 Issue 8456, Special Section p12-12, 2/3p, 1c.

• NewsFutures

Four Conditions that Characterize Wise Crowds

1. Diversity of Opinion--> A broad range of people with private info

2. Independence --> Opinions are not determined by thoese around them

3. Decentralization --> People specialized adn draw on local knowledge

4. Aggregation --> private information is drawn together into collective judgment

From The Wisdom of Crowds by James Surowiecki