Publication:
Prediction markets: a review with an experimentally based recommendation for Navy force-shaping application

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Authors
Chinn, Michael A.
Huffman, Leslie A.
Subjects
Prediction markets
information markets
information aggregation
forecasting
force shaping
Advisors
Arkes, Jeremy A.
Gates, William R.
Date of Issue
2009-12
Date
December 2009
Publisher
Monterey, California: Naval Postgraduate School
Language
Abstract
Prediction markets generally are small-scale electronic markets that tie payoffs to measurable future events. They are similar to stock markets, where the "stocks" are outcomes or events rather than shares in a company. The growing popularity of prediction markets reflects the notion that markets are an excellent means of efficient information aggregation among a disparate group of people. Trading prices in the prediction markets provide decision makers with a timely, accurate, and continuously updated picture on the likelihood of future events. This enables decision makers to better evaluate risk. Based on historical successes in prediction market utilization, it is both logical and important to assess the usefulness of prediction markets in contributing to critical elements of Navy total force shaping. Navy Manpower, Personnel, Training, and Education (N1) regularly forecasts re-enlistment rates, over/under endstrength, and many other force-shaping factors as an input into their resource allocation decision-making process. In an effort to improve upon the force-shaping decision-making process, N1 has shown interest in using prediction markets to complement or replace alternative methods for forecasting various Navy force-shaping elements. The aim of this thesis is to act as a foundation for ongoing prediction market research within the Department of Defense (DoD).
Type
Description
MBA Professional Report
Department
Business Administration
Identifiers
NPS Report Number
Sponsors
Funder
Format
xviii, 103 p.
28 cm.
Citation
Distribution Statement
Approved for public release; distribution is unlimited.
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