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Forecasting Accuracy: Comparing Prediction Markets And Surveys – An Experimental Study

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  • Robert Reig
  • Ramona Schoder

Abstract

Prediction markets are viewed as the most accurate instrument for collective forecasts. However, empirical studies, mostly based on political elections, deliver mixed results. An experimental study was conducted to avoid certain biases and problems and to better control conditions of eliciting information from individuals. One typical problem is for example comparing prediction markets that focus on judging the public opinion in the future with polls asking for individual election preferences at a certain point of time. Therefore, our study compared forecast accuracy between prediction markets and a simple survey for the same forecasting item. The results showed roughly the same accuracy for all employed methods with the survey delivering slightly better results at lower costs, which was surprising. The experiments demonstrated also that it is possible to gain highly accurate forecasts with a relatively small number of participants (6-17) taking part continuously.

Suggested Citation

  • Robert Reig & Ramona Schoder, 2010. "Forecasting Accuracy: Comparing Prediction Markets And Surveys – An Experimental Study," Journal of Prediction Markets, University of Buckingham Press, vol. 4(3), pages 1-19.
    • Handle: RePEc:buc:jpredm:v:4:y:2010:i:3:p:1-19
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    References listed on IDEAS

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    1. Berg, Joyce & Forsythe, Robert & Nelson, Forrest & Rietz, Thomas, 2008. "Results from a Dozen Years of Election Futures Markets Research," Handbook of Experimental Economics Results, in: Charles R. Plott & Vernon L. Smith (ed.), Handbook of Experimental Economics Results, edition 1, volume 1, chapter 80, pages 742-751, Elsevier.
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    More about this item

    Keywords

    Forecasting accuracy; experiment; method comparison; information aggregation; prediction markets; survey;
    All these keywords.

    JEL classification:

    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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