My polished presentation on the problems of prediction markets.

1. Domas Monkus
domas@nous.lt
Nous
www.nous.lt
PREDICTION MARKETS
INTRO AND PROBLEMS
D

2. Who are the winners of Democamp?
● Polls
● Expert opinions
● Statistical models
● Bets

3. Who are the winners of Democamp?
- “Who, do you think, will win?”
- “My team, of course!”
Opinions are biased. So are the polls.

4. Prediction markets
● Iowa Electronic Markets - 1988
● „Wisdom of the crowds“ (J.Surowiecki,
2004)

5. Prediction markets
● Stocks are tied to events
● Stock payouts depend on the outcomes
● Stock prices correlate with the probabilities

6. Prediction markets: an example
● Democamp: 11 startups
● 11 possible winners
● 11 stocks in the Democamp
market
● The winning team's stock
will produce a payout (profit)

7. Prediction markets
The benefit? Accuracy!
Iowa Electronic Markets: 2008 US President election
Democrats
Republicans

8. Prediction markets
Why?
● „Wisdom of the crowds“ (J.Surowiecki)
● Incentives for information discovery and
truthful revelation of beliefs
● Efficient market hypothesis

9. Prediction markets – who's in?
...

10. Prediction markets – who's using them?
Demokratai
Respublikonai

11. What's the problem?
Demokratai
Respublikonai
● Users
● Usability

12. Why facebook?
A channel for:
● User acquisition
● User activation
● User retention
● User referrals
High trading volumes and thus a large
user base is necessary for forecasting
accuracy.

13. Usability
Financial and stock market terms are
difficult for most people.
Yet they are the essence of prediction
markets.
So how much of the “market” can you
hide before you start to lose the
“prediction”?

14. The future
● Sell the service (SaaS)
● Sell the information
● In-game-purchases

15. Thank you