IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Do Prediction Markets Aid Defenders in a Weak-Link Contest?

  • Cary Deck


    (Department of Economics, University of Arkansas and Economic Science Institute, Chapman University)

  • Li Hao


    (Department of Economics, University of Arkansas)

  • David Porter


    (Economic Science Institute, Chapman University)

Laboratory experiments have demonstrated that prediction market prices weakly aggregate the disparate information of the traders about states (moves) of nature. However, in many practical applications one might want to predict the move of a strategic participant. This is particularly important in aggressor-defender contests. This paper reports a set of such experiments where the defender may have the advantage of observing a prediction market on the aggressor’s action. The results of the experiments indicate that: the use of prediction markets does not increase the defender’s win rate; prediction markets contain reliable information regarding aggressors’ decisions, namely excess bid information, that is not being exploited by defenders; and the existence of a prediction market alters the behavior of the aggressor whose behavior is being forecast.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Chapman University, Economic Science Institute in its series Working Papers with number 13-27.

in new window

Length: 27 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:chu:wpaper:13-27
Contact details of provider: Postal:
One University Drive, Orange, CA 92866

Phone: (714) 628-2830
Fax: (714) 628-2881
Web page:

More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Szentes, Balazs & Rosenthal, Robert W., 2003. "Three-object two-bidder simultaneous auctions: chopsticks and tetrahedra," Games and Economic Behavior, Elsevier, vol. 44(1), pages 114-133, July.
  2. Justin Wolfers & Eric Zitzewitz, 2004. "Prediction Markets," NBER Working Papers 10504, National Bureau of Economic Research, Inc.
  3. Dan Kovenock J. & Brian Roberson, 2010. "Conflicts with Multiple Battlefields," CESifo Working Paper Series 3165, CESifo Group Munich.
  4. Harris, Christopher J & Vickers, John S, 1985. "Patent Races and the Persistence of Monopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 33(4), pages 461-81, June.
  5. Cary Deck & David Porter, 2013. "Prediction Markets In The Laboratory," Journal of Economic Surveys, Wiley Blackwell, vol. 27(3), pages 589-603, 07.
  6. Dechenaux, Emmanuel & Kovenock, Dan & Sheremeta, Roman M., 2012. "A survey of experimental research on contests, all-pay auctions and tournaments," Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism" SP II 2012-109, Social Science Research Center Berlin (WZB).
  7. Derek J. Clark & Kai A. Konrad, 2007. "Contests with Multi-tasking," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(2), pages 303-319, 06.
  8. Szentes, Balazs & Rosenthal, Robert W., 2003. "Beyond chopsticks: Symmetric equilibria in majority auction games," Games and Economic Behavior, Elsevier, vol. 45(2), pages 278-295, November.
  9. Chowdhury, Subhasish & Kovenock, Dan & Sheremeta, Roman, 2011. "An Experimental Investigation of Colonel Blotto Games," MPRA Paper 46810, University Library of Munich, Germany.
  10. Charles F. Manski, 2004. "Interpreting the Predictions of Prediction Markets," NBER Working Papers 10359, National Bureau of Economic Research, Inc.
  11. Sergiu Hart, 2008. "Discrete Colonel Blotto and General Lotto games," International Journal of Game Theory, Springer;Game Theory Society, vol. 36(3), pages 441-460, March.
  12. Anderson, Lisa R & Holt, Charles A, 1997. "Information Cascades in the Laboratory," American Economic Review, American Economic Association, vol. 87(5), pages 847-62, December.
  13. Plott, Charles R & Sunder, Shyam, 1988. "Rational Expectations and the Aggregation of Diverse Information in Laboratory Security Markets," Econometrica, Econometric Society, vol. 56(5), pages 1085-1118, September.
  14. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
  15. Christopher Harris & John Vickers, 1987. "Racing with Uncertainty," Review of Economic Studies, Oxford University Press, vol. 54(1), pages 1-21.
  16. Snyder, James M, 1989. "Election Goals and the Allocation of Campaign Resources," Econometrica, Econometric Society, vol. 57(3), pages 637-60, May.
  17. Paola Gallardo & Alexandra Heath, 2009. "Execution methods in foreign exchange markets," BIS Quarterly Review, Bank for International Settlements, March.
  18. Deck, Cary & Lin, Shengle & Porter, David, 2013. "Affecting policy by manipulating prediction markets: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 85(C), pages 48-62.
  19. Fudenberg, Drew & Gilbert, Richard & Stiglitz, Joseph & Tirole, Jean, 1983. "Preemption, leapfrogging and competition in patent races," European Economic Review, Elsevier, vol. 22(1), pages 3-31, June.
  20. Arad Ayala, 2012. "The Tennis Coach Problem: A Game-Theoretic and Experimental Study," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 12(1), pages 1-43, April.
  21. Arad, Ayala & Rubinstein, Ariel, 2012. "Multi-dimensional iterative reasoning in action: The case of the Colonel Blotto game," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 571-585.
  22. Laslier, Jean-Francois & Picard, Nathalie, 2002. "Distributive Politics and Electoral Competition," Journal of Economic Theory, Elsevier, vol. 103(1), pages 106-130, March.
  23. Yetkin ÇINAR & Türkmen GÖKSEL, 2012. "An experimental analysis of Colonel Blotto Games under alternative environments," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 27(312), pages 39-57.
  24. Plott, Charles & Hung, Angela, 1998. "Information Cascades: Replication and an Extension to Majority Rule and Conformity Rewarding Institutions," Working Papers 1051, California Institute of Technology, Division of the Humanities and Social Sciences.
  25. Kvasov, Dmitriy, 2007. "Contests with limited resources," Journal of Economic Theory, Elsevier, vol. 136(1), pages 738-748, September.
  26. repec:reg:rpubli:460 is not listed on IDEAS
  27. Smith, Vernon L & Suchanek, Gerry L & Williams, Arlington W, 1988. "Bubbles, Crashes, and Endogenous Expectations in Experimental Spot Asset Markets," Econometrica, Econometric Society, vol. 56(5), pages 1119-51, September.
  28. Steven Gjerstad, 2004. "Risk Aversion, Beliefs, and Prediction Market Equilibrium," Microeconomics 0411002, EconWPA.
  29. Brian Roberson, 2006. "The Colonel Blotto game," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(1), pages 1-24, September.
  30. Russell Golman & Scott Page, 2009. "General Blotto: games of allocative strategic mismatch," Public Choice, Springer, vol. 138(3), pages 279-299, March.
  31. Caginalp, Gunduz & Porter, David & Smith, Vernon, 2000. "Momentum and overreaction in experimental asset markets," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 187-204, January.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:chu:wpaper:13-27. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Megan Luetje)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.