Document Type
Article
Publication Date
2015
Abstract
Laboratory experiments have demonstrated that prediction market prices weakly aggregate the disparate information of the traders about states (moves) of nature. However, in many practical applications one is attempting to predict the move of a strategic rival. This is particularly important in aggressor–defender contests. This paper reports an experiment where the defender may have the advantage of observing a prediction market on the aggressor's action. The results of the experiments indicate that: the use of prediction markets does not increase the defender's win rate; prediction markets contain reliable information regarding aggressors’ decisions that is not being exploited by defenders; and the existence of a prediction market does not alter the behavior of the aggressor whose behavior is being forecast.
Recommended Citation
Deck, C., Hao, L., and Porter, D. (2015). “Do Prediction Markets Aid Defenders in a Weak-Link Contest?” Journal of Economic Behavior and Organization 117, September 2015, pp. 248-258. DOI: 10.1016/j.jebo.2015.06.019
Peer Reviewed
1
Copyright
Elsevier
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.
Comments
NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Economic Behavior and Organization. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Economic Behavior and Organization, volume 117, in 2015. DOI: 10.1016/j.jebo.2015.06.019
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