Prediction Markets as an Information Aggregation Tool for Effective Project Management in Defense Acquisition Projects

Abstract

A central challenge in defense acquisition is the development of accurate cost and schedule estimates. The lack of discipline in estimating and unrealistic expectations in the early phases of programs have been often cited as common causes for poor performance of large programs (GAO, 2004, 2006). Initial estimates provided by contractors are known to ''anchor'' expectations (Aranda & Easterbrook, 2005), even when changes in personnel, technology, or budgetary priorities can affect the performance of a program. We examine the use of prediction markets as a tool for generating schedule estimates as a supplement to existing estimation methodologies.