Predictive power of markets on the web

Nejc Ločniškar (2011) Predictive power of markets on the web. EngD thesis.

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Abstract

The goal of this work is to create a web based application for prediction of future events outcomes using prediction markets. We first analyze prediction markets, their purpose and their functioning. We present the wisdom of the crowds concept and its role in the application itself. We describe the software tools used in the development process, the architectural design of the solution and the implementation of prediction markets as part of a web application. The focus is on three types of prediction markets: mutual betting market, supply and demand market and liquid market with the use of LMSR. The life cycle of an event is presented, from its creation, prediction of possible outcomes, and its termination. Prediction markets are capable of producing accurate predictions, which can be as accurate and sometimes more accurate than classical surveys. Their use in a web application therefore encourages academical and commercial use.

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