Putting a Price on Strategy: Implementing a Prediction Market in a Modern Military Unit

Abstract

Prediction markets are speculative markets created for aggregating relevant information on some measurable future event. Simply put, prediction markets ask participants to trade ideas as stocks. The “market price” of a particular idea or contract can then be interpreted as the probability that an event will occur, or as a feedback mechanism regarding how well some course of action is working. The application and utility of prediction markets to military strategy and decision-making has yet to be adequately tested in any real or empirical way. This thesis seeks to understand the conditions under which the application of a prediction market would be both successful and useful to military commanders. To test this, markets were established with three different organizations and included more than 135 participants. Upon the closing of the markets, results and participant surveys were analyzed. The data collected indicate that such a tool could be quite useful if employed and illuminate a variety of challenges that must be addressed in order to implement a prediction market in a military unit.