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Designing real terrorism futures

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Author Info
Robin Hanson ()
Abstract

In July 2003, the Policy Analysis Market (PAM) was described as terrorism futures, and immediately cancelled. While PAM was not in fact designed to be terrorism futures, I here consider five design issues with implementing and using real terrorism futures: combinatorics, manipulation, moral hazard, hiding prices, and decision selection bias. As neither these nor other problems seem insurmountable, terrorism futures appears to be a technically realistic possibility. Copyright Springer Science+Business Media B.V. 2006

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File URL: http://hdl.handle.net/10.1007/s11127-006-9053-9
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Publisher Info
Article provided by Springer in its journal Public Choice.

Volume (Year): 128 (2006)
Issue (Month): 1 (July)
Pages: 257-274
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:kap:pubcho:v:128:y:2006:i:1:p:257-274

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Web page: http://www.springerlink.com/link.asp?id=100332

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Related research
Keywords: Terrorism; Prediction markets; Decision markets; Information markets; Idea futures; Manipulation; Moral hazard; Selection bias; Combinatorics;

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.:

  1. Figlewski, Stephen, 1979. "Subjective Information and Market Efficiency in a Betting Market," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 75-88, February. [Downloadable!] (restricted)
  2. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-38, August. [Downloadable!] (restricted)
    Other versions:
  3. Hanson, Robin & Oprea, Ryan & Porter, David, 2006. "Information aggregation and manipulation in an experimental market," Journal of Economic Behavior & Organization, Elsevier, vol. 60(4), pages 449-459, August. [Downloadable!] (restricted)
  4. Justin Wolfers & Eric Zitzewitz, 2004. "Prediction Markets," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 107-126, Spring. [Downloadable!] (restricted)
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  5. Roll, Richard, 1984. "Orange Juice and Weather," American Economic Review, American Economic Association, vol. 74(5), pages 861-80, December. [Downloadable!] (restricted)
  6. Maloney, Michael T. & Mulherin, J. Harold, 2003. "The complexity of price discovery in an efficient market: the stock market reaction to the Challenger crash," Journal of Corporate Finance, Elsevier, vol. 9(4), pages 453-479, September. [Downloadable!] (restricted)
  7. Spiegel, Matthew & Subrahmanyam, Avanidhar, 1992. "Informed Speculation and Hedging in a Noncompetitive Securities Market," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 5(2), pages 307-29. [Downloadable!] (restricted)
  8. Kyle, Albert S, 1989. "Informed Speculation with Imperfect Competition," Review of Economic Studies, Blackwell Publishing, vol. 56(3), pages 317-55, July. [Downloadable!] (restricted)
  9. Hillion, Pierre & Suominen, Matti, 2004. "The manipulation of closing prices," Journal of Financial Markets, Elsevier, vol. 7(4), pages 351-375, October. [Downloadable!] (restricted)
  10. Eldor, Rafi & Melnick, Rafi, 2004. "Financial markets and terrorism," European Journal of Political Economy, Elsevier, vol. 20(2), pages 367-386, June. [Downloadable!] (restricted)
  11. Paul W. Rhode & Koleman S. Strumpf, 2004. "Historical Presidential Betting Markets," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 127-142, Spring. [Downloadable!] (restricted)
  12. Kumar, Praveen & Seppi, Duane J, 1992. " Futures Manipulation with "Cash Settlement."," Journal of Finance, American Finance Association, vol. 47(4), pages 1485-502, September. [Downloadable!] (restricted)
  13. Chakraborty, Archishman & Yilmaz, Bilge, 2004. "Manipulation in market order models," Journal of Financial Markets, Elsevier, vol. 7(2), pages 187-206, February. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Justin Wolfers & Eric Zitzewitz, 2006. "Prediction Markets in Theory and Practice," IZA Discussion Papers 1991, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
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