Methods to Elicit Forecasts from Groups: Delphi and Prediction Markets Compared
AbstractTraditional groups meetings are an inefficient and ineffective method for making forecasts and decisions. We compare two structured alternatives to traditional meetings: the Delphi technique and prediction markets. Delphi is relatively simple and cheap to implement and has been adopted for diverse applications in business and government since its origins in the 1950s. It can be used for nearly any forecasting, estimation, or decision making problem not barred by complexity or ignorance. While prediction markets were used more than a century ago, their popularity waned until more recent times. As a consequence there is less evidence on their validity. Prediction markets need many participants. They need clear outcomes in order to determine participants’ pay-offs. Even so, relating their knowledge to market prices is not intuitive to everyone and constructing contracts that will provide a useful forecast may not be possible for some problems. It is difficult to maintain confidentiality with markets and they are vulnerable to manipulation. Delphi is designed to reveal panelists’ knowledge and opinions via their forecasts and the reasoning they provide. This format allows testing of knowledge and learning by panelists as they refine their forecasts. Such a process does not happen explicitly in prediction markets and may not happen at all. The reasoning provided as an output of the Delphi process is likely to be reassuring to forecast users who are uncomfortable with the “black box” nature of prediction markets. We consider that, half a century after its original development, Delphi is greatly under-utilized.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 4663.
Date of creation: 31 Aug 2007
Date of revision:
accuracy; forecasting methods; groups; judgment; meetings; structure;
Other versions of this item:
- Kesten Green & J. Scott Armstrong & Andreas Graefe, 2007. "Methods to Elicit Forecasts from Groups: Delphi and Prediction Markets Compared," Foresight: The International Journal of Applied Forecasting, International Institute of Forecasters, issue 8, pages 17-20, Fall.
- C88 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Other Computer Software
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other
- C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-09 (All new papers)
- NEP-CBE-2007-09-09 (Cognitive & Behavioural Economics)
- NEP-FOR-2007-09-09 (Forecasting)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Graefe, Andreas & Armstrong, J. Scott, 2011.
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International Journal of Forecasting,
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- Robert J. MacCoun, 2010. "Comment on "Rethinking America’s Illegal Drug Policy"," NBER Chapters, in: Controlling Crime: Strategies and Tradeoffs, pages 281-289 National Bureau of Economic Research, Inc.
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