Prediction markets as a way to manage acquisition programs

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 acquisition programs. This thesis evaluates the usefulness of prediction markets in the Defense (DoD) acquisition field.