In this article, we will discuss what prediction markets and the accuracy it has for predicting is. Also, we will discuss other issues which are related to this kind of market.
What is a prediction market?
These are the markets that can also be called as betting market, political betting market, etc. These are the exchange-traded markets that are created for trading for the outcome. The market price will change on what the people in the market think is going to happen.
In the prediction market, you can trade anywhere that is from 0 – 100%. This is a binary option, and it will expire at the price of either 0 – 100%. The prediction market can be thought of as belonging to a more general concept of crowds sourcing.
This design is made so that it collects all the common interests on the most popular topics. The main purpose is to provide facts and figures to the people and let them guess and see if they are right. Many traders in the market trade on the unknown fact of the market.
The market price of a particular thing will depend on the things purchased by the people. This kind of thing is also known as aggregated belief and is the most important in this kind of market.
What is the accuracy of these markets?
The ability of the market to aggregate information and make an accurate prediction is based on the efficient-market hypothesis. This shows us that the price of certain things reflects all the available information. James Surowiecki, who is an American journalist, has broken it down into three conditions. These are the diversity of the information, independence of information, and decentralization.
In this market, each of the people that participate has their unique information. These markets are decentralized because it is controlled by the people and so it gives an accurate prediction. The prediction market is an advantage over the other forms of the market in the world.
Because of the people and their many resources, this market is providing accurate information and more. Prediction markets are called to be fairly accurate and successful, but it is not completely true.
The prediction market gets all their information from the wisdom of their crows. It means that they use all the person’s wisdom and then use it in the predictions market.
What is some other issue faced by the prediction market?
Here is the list of some common issues or problems that are being faced by the prediction market.
- Legality
Since online gambling is outlawed in America through federal law and state law. Most of the prediction market in the US operates with play money rather than real money. They are free to play and offer prizes to their best player in the match.
- Controversial incentives
A market that is related to either death or survival of the world leader is more useful for people. This is why this market can also be called an assassination market for the killing of people.