DP5562 Five Open Questions About Prediction Markets

Author(s): Justin Wolfers, Eric Zitzewitz
Publication Date: March 2006
Keyword(s): event futures, information markets, instrumental variables, market manipulation, prediction IV, prediction markets
JEL(s): C9, D7, D8, G1, M2
Programme Areas: Labour Economics, Public Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=5562

Interest in prediction markets has increased in the last decade, driven in part by the hope that these markets will prove to be valuable tools in forecasting, decision-making and risk management - in both the public and private sectors. This paper outlines five open questions in the literature, and we argue that resolving these questions is crucial to determining whether current optimism about prediction markets will be realized.