Bluffing Could Be Common In Prediction Markets, Study Shows
Sure you or I have bluffed once in our lives. But how far can people go on doing this so-called white lies (?).
In a new study, the University of Michigan suggests that bluffing in prediction markets is a profitable strategy more often than previously thought.
The analysis calls into question the incentives such markets create for revealing information and making accurate predictions. The researchers also pose a tactic to discourage bluffing.
A prediction market is a financial speculation market in which participants bet on the outcome of an event. In most cases, participants use fake money. But at some markets, including the Iowa Electronic Markets, it's legal to bet a small amount of real money. Sports betting Web sites, which are legal in other countries, could be considered prediction markets. Some companies are even using prediction markets as a project management tool to allow employees to predict when a project will be completed.