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Affecting Policy by Manipulating Prediction Markets: Experimental Evidence

Author

Listed:
  • Cary Deck

    () (University of Arkansas and Economic Science Institute)

  • Shengle Lin

    (Economic Science Institute, Chapman University)

  • David Porter

    () (Economic Science Institute, Chapman University)

Abstract

Documented results indicate prediction markets effectively aggregate information and form accurate predictions. This has led to a proliferation of markets predicting everything from the results of elections to a company’s sales to movie box office receipts. Recent research suggests prediction markets are robust to manipulation attacks and resulting market outcomes improve forecast accuracy. However, we present evidence from the lab indicating that well funded, single minded manipulators can in fact destroy a prediction market’s ability to aggregate information. Our results clearly indicate that the usefulness of prediction markets as inputs to decision making may be limited.

Suggested Citation

  • Cary Deck & Shengle Lin & David Porter, 2010. "Affecting Policy by Manipulating Prediction Markets: Experimental Evidence," Working Papers 10-15, Chapman University, Economic Science Institute.
  • Handle: RePEc:chu:wpaper:10-15
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Lionel Page & Christoph Siemroth, 2018. "How much information is incorporated in financial asset prices? Experimental Evidence," QuBE Working Papers 054, QUT Business School.
    2. Deck, Cary & Hao, Li & Porter, David, 2015. "Do prediction markets aid defenders in a weak-link contest?," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 248-258.
    3. Patrick Buckley & Fergal O’Brien, 0. "The effect of malicious manipulations on prediction market accuracy," Information Systems Frontiers, Springer, vol. 0, pages 1-13.
    4. Florian Teschner & David Rothschild & Henner Gimpel, 2017. "Manipulation in Conditional Decision Markets," Group Decision and Negotiation, Springer, vol. 26(5), pages 953-971, September.
    5. repec:spr:infosf:v:19:y:2017:i:3:d:10.1007_s10796-015-9617-7 is not listed on IDEAS

    More about this item

    Keywords

    Information Aggregation; Prediction Markets; Manipulation;

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • G1 - Financial Economics - - General Financial Markets

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