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Improving the Idea Screening Process within Organizations using Prediction Markets: A Theoretical Perspective

Author

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  • Gerrit Kamp
  • Peter Koen

Abstract

Prediction markets have been identified as a valuable mechanism to evaluate and select ideas in the corporate innovation processes, because these markets leverage the collective wisdom of the entire organization. However, initial studies report low prediction accuracies and their usefulness is being challenged. A better theoretical understanding of idea markets is needed. Based on economic theory, experimental economics, and existing prediction market research, we present such a theory for the accuracy of idea markets. The theory is used to explain why current markets may have low prediction accuracy, and also why idea markets have great potential for improving idea screening.

Suggested Citation

  • Gerrit Kamp & Peter Koen, 2009. "Improving the Idea Screening Process within Organizations using Prediction Markets: A Theoretical Perspective," Journal of Prediction Markets, University of Buckingham Press, vol. 3(2), pages 39-64, August.
    • Handle: RePEc:buc:jpredm:v:3:y:2009:i:2:p:39-64
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    Citations

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    Cited by:

    1. Ivo Blohm & Christoph Riedl & Johann Fuller & Orhan Koroglu & 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.
    2. Ivo Blohm & Christoph Riedl & Johann Füller & Jan Marco Leimeister, 2016. "Rate or Trade? Identifying Winning Ideas in Open Idea Sourcing," Information Systems Research, INFORMS, vol. 27(1), pages 27-48, March.
    3. Edoardo Gaffeo, 2013. "Using information markets in grantmaking. An assessment of the issues involved and an application to Italian banking foundations," DEM Discussion Papers 2013/08, Department of Economics and Management.
    4. Patrick Buckley & Fergal O’Brien, 0. "The effect of malicious manipulations on prediction market accuracy," Information Systems Frontiers, Springer, vol. 0, pages 1-13.
    5. Riekhof, Hans-Christian & Riekhof, Marie-Catherine & Brinkhoff, Stefan, 2012. "Predictive Markets: Ein vielversprechender Weg zur Verbesserung der Prognosequalität im Unternehmen?," PFH Forschungspapiere/Research Papers 2012/07, PFH Private University of Applied Sciences, Göttingen.
    6. Patrick Buckley & Fergal O’Brien, 2017. "The effect of malicious manipulations on prediction market accuracy," Information Systems Frontiers, Springer, vol. 19(3), pages 611-623, June.

    More about this item

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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