The prediction market we ran as part of our innovation program for high potential young employees at a large financial services firm turned out a great success on a number of levels. Most important, it generated excitement around the proposals, motivating a high percentage of participants to actively trade and provide a new type of [...]

A few years ago, when James Surowieki’s book, The Wisdom of Crowds, came out, I became interested in prediction markets as a way to tap the collective wisdom of the participants in our innovation programs. While we provide the innovation teams with frequent feedback from senior management, program faculty, and other industry experts as they [...]

Here are my notes on the paper, Prediction Markets, by Justin Wolfers and Eric Zitzewitz
Accuracy Wolfers and Zitzewitz recently published Interpreting Prediction Market Prices as Probabilities that claims that “prediction market prices are usually close to the mean beliefs of traders” and concludes…
with some guidance for practitioners. In most cases we find that prediction [...]

Notes on DEMOCRATIZING INNOVATION- by Eric Von Hippel
Why users innovate for themselves
Users do it themselves rather than hiring a customizer because of agency costs (i.e., cost of monitoring the agent), because their needs are unique and they want to get precisely what they want, and also becuase they enjoy innovating.
Because innovation by users is widely distributed, [...]

Here’s the closest thing I’ve found to an explanation of how to set up and conduct a prediction market. This paper, INFORMATION AGGREGATION MECHANISMS: CONCEPT, DESIGN AND IMPLEMENTATION FOR A SALES FORECASTING PROBLEM, by Charles R. Plott of CalTech and Kay-Yut Chen of Hewlett Packard Laboratories, describes how they set up a prediction market for [...]