Don Marti

Wed 05 Jul 2006 08:27:58 PM PDT

One person's prediction market...

Jason Ruspini writes, "Real-money markets whose primary purpose is to reveal information and that provide no significant risk-sharing, capitalization or entertainment value must be subsidized...."

A prediction market is a tool for buying information. Robin Hanson: "The whole idea of prediction markets is that someone who wants to know the answer to a question might be willing to pay to create a market to entice traders to help answer their question."

That's the prediction market from the point of view of the people who want the information. What is the prediction market from the point of view of the people who have the information? If you're a sales rep playing the sales forecasting market, from your point of view the prediction market is an incentive market. Besides your commission, you also earn by helping the market get the forecast right. The money to pay you for that information has to come from somewhere.

So my idea of a software deficiency market isn't really a prediction market at all. It's just a market for, on one side, hedging the risk of having to run software that doesn't do what you want, and, on the other side, a market for selling your ability to make software do what people want. The information is a by-product.

(After reading Chris. F. Masse .COM for a while, I now have a bunch more RSS subscriptions on the subject of prediction markets, so I should be making fewer mistakes like that in the future.)

Technology journalism needs more prediction markets.