How to Pay Traders in Information Markets: Results from a Field Experiment
AbstractThe results of recent studies on prediction markets are encouraging. Prior experience demonstrates that markets with different incentive schemes predicted uncertain future events remarkably accurately. In this paper, we study the impact of different monetary incentives on prediction accuracy in a field experiment. In order to do so, we compare three groups of traders, corresponding to three treatments with different payment schemes, in a prediction market for the FIFA World Cup 2006. Somewhat surprisingly, our results show that performance-related payment schemes do not necessarily increase the prediction accuracy. Due to the risk aversion of traders the competitive environment in a rank-order tournament leads to the best results in terms of prediction accuracy.
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Bibliographic InfoArticle provided by University of Buckingham Press in its journal Journal of Prediction Markets.
Volume (Year): 1 (2007)
Issue (Month): 2 (July)
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Web page: http://www.ubpl.co.uk/
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- Palan, Stefan, 2010. "Digital options and efficiency in experimental asset markets," Journal of Economic Behavior & Organization, Elsevier, vol. 75(3), pages 506-522, September.
- Ivo Blohm & Christoph Riedl & Johann F\"uller & Orhan K\"oroglu & Jan Marco Leimeister & Helmut Krcmar, 2012. "The Effects of Prediction Market Design and Price Elasticity on Trading Performance of Users: An Experimental Analysis," Papers 1204.3457, arXiv.org.
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