Autoplay Next video from Max length

Archive: Designing Markets for Prediction

3,097 views · Published 14 November 2013 · 59:00 · Indexed 12 November 2026

Channel: UW Video · 2013 · Education

In this talk, Yiling Chen of Harvard, discusses how to better design market mechanisms for the purpose of information aggregation. Presented are some results on designing combinatorial prediction markets that offer more expressiveness for traders to reveal their information, among other desirable properties.
A prediction market is a betting intermediary designed to aggregate information. It offers contracts whose payoff is tied to outcomes of an event of interest and attracts participants to trade the contracts. For instance, a contract that pays $1 if the US unemployment rate in February 2013 is greater than 10% and $0 otherwise can be used to predict the likelihood that the employment rate will soar. If the current market price of the contract is $0.3, a rational, risk-neutral trader should be willing to buy the contract if he believes the true probability for the unemployment rate to be greater than 10% is greater than 0.3. Conversely, he should be willing to sell the contract if he believes the true probability is lower than 0.3. The market price hence incorporates the information of participants and approximately represents a real-time consensus forecast for the event.

Yiling Chen, Harvard University

11/29/2012
The University of Washington is committed to ensuring digital accessibility in our services, programs, and activities. If you encounter accessibility barriers using videos found on this channel, please contact UW Video at [email protected].

Archive: Designing Markets for Prediction

More from this channel