Tuesday, January 15, 2008

Ready to bet on the future?

Join the PopSci Predictions Exchange.

Welcome to the PPX, the first place to bet on the future of science and technology. It's easy and free: Log on, and we'll give you POP$250,000 in our virtual PopSci Dollars. Use that money to buy propositions you think are likely to happen. If other traders also want to buy, that proposition's price will go up, and you'll make PopSci bucks. Expand your portfolio with bets on energy, space, consumer technology and extreme science, and compete against other players for prizes and bragging rights. Ready to get started?

Of course, PopSci isn't the only place where one can find Prediction Markets. Here's a piece about the Google Prediction Markets from the NYTimes Freakonomics column.

Here's what Google has to say about their market ... and prediction Markets in general:

We designed the market so that the price of an event should, in theory, reflect a consensus probability that the event will occur. To determine accuracy of the market, we looked at the connection between prices of events and the frequency with which they actually occurred. If prices are correct, events priced at 10 cents should occur about 10 percent of the time.

In the graph below [edit: follow this link], the X-axis indicates the price ranges for the group. The orange line represents the average price, which is how often outcomes in that group should actually happen according to market prices. The purple line is how often they did happen. Ideally these would be equal, and as you can see they're pretty close. So our prices really do represent probabilities - very exciting!

You can find the rest of the piece here.

Wiipedia has a piece on the history, theory and accuracy of Prediction Markets.

I personally find the idea fascinating. Of course, I've always wanted to have a crystal ball. Don't we all?

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