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Can Manipulators Mislead Prediction Market Observers?

Author

Listed:
  • RYan Oprea

    (University Of California, Santa Cruz)

  • David Porter

    (Economic Science Institute, CHapman University)

  • Chris Hibbert
  • Robin Hanson

    (George Mason University)

  • Dorina Tila

    (George Mason University)

Abstract

We study experimental markets where privately informed traders exchange simple assets, and where uninformed third parties are asked to forecast the values of these assets, guided only by market prices. Although prices only partially aggregate information, they significantly improve the forecasts of third parties. In a second treatment, a portion of traders are given preferences over the forecasts made by observers. Although we find evidence that these traders attempt to manipulate prices in order to influence the beliefs of observers, we find no evidence that observers make less accurate forecasts as a result.

Suggested Citation

  • RYan Oprea & David Porter & Chris Hibbert & Robin Hanson & Dorina Tila, 2008. "Can Manipulators Mislead Prediction Market Observers?," Working Papers 08-01, Chapman University, Economic Science Institute.
    • Handle: RePEc:chu:wpaper:08-01
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    References listed on IDEAS

    as
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    Cited by:

    1. Snowberg, Erik & Wolfers, Justin & Zitzewitz, Eric, 2013. "Prediction Markets for Economic Forecasting," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 2, chapter 0, pages 657-687, Elsevier.
    2. Kyle C. Meng, 2017. "Using a Free Permit Rule to Forecast the Marginal Abatement Cost of Proposed Climate Policy," American Economic Review, American Economic Association, vol. 107(3), pages 748-784, March.
    3. Douglas Davis & Oleg Korenok & Edward Simpson Prescott, 2011. "An experimental analysis of contingent capital triggering mechanisms," Working Paper 11-01, Federal Reserve Bank of Richmond.
    4. Legge, Stefan & Schmid, Lukas, 2016. "Media attention and betting markets," European Economic Review, Elsevier, vol. 87(C), pages 304-333.

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