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An in-depth analysis of information markets with aggregate uncertainty

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Abstract

The novel idea of setting up Internet-based virtual markets, information markets, to aggregate dispersed information and predict outcomes of uncertain future events has empirically found its way into many domains. But the theoretical examination of information markets has lagged relative to their implementation and use. This paper proposes a simple theoretical model of information markets to understand their information dynamics. We investigate and provide initial answers to a series of research questions that are important to understanding how information markets work, which are: (1) Does an information market converge to a consensus equilibrium? (2) If yes, how fast is the convergence process? (3) What is the best possible equilibrium of an information market? and (4) Is an information market guaranteed to converge to the best possible equilibrium?

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Authors and Affiliations

  1. School of Information Sciences and Technology, The Pennsylvania State University, University Park, 16802

    Yiling Chen, Tracy Mullen & Chao-Hsien Chu

Authors
  1. Yiling Chen
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  2. Tracy Mullen
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  3. Chao-Hsien Chu
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Corresponding author

Correspondence to Yiling Chen.

Additional information

The authors acknowledge the support of the eBusiness Research Center at the Pennsylvania State University.

Yiling Chen is a postdoctoral research scientist at Yahoo! Research, New York. She received her Bachelor of Economics degree in Commodity Science from Renmin University of China, in 1996, and her Master of Economics degree in Finance from Tsinghua University, China, in 1999. She worked for PriceWaterhouse Coopers China as a professional auditor from August 1999 to June 2000. From August 2000 to July 2001, she attended Iowa State University, Ames, IA, as a Ph.D. student in economics. She obtained her Ph.D. in Information Sciences and Technology from the Pennsylvania State University, University Park, PA, in 2005. Her research interests lie on the boarder of computer science, economics, and business, including information markets, auction theory, and machine learning.

Tracy Mullen is an assistant professor of information sciences and technology at the Pennsylvania State University, University Park, PA. She has previously worked at Lockheed Martin, Bellcore, and NEC Research. She received her PhD in Computer Science from University of Michigan. Her research interests include information markets, multiagent systems, ecommerce, market-based resource allocation for sensor management, and supply chain simulations using intelligent agents. Her research papers have been published in Decision Support Systems, Electronic Commerce Research, IEEE Computer, ACM Transactions on Internet Technology, Mathematics and Computers in Simulation, and Operating Systems Review, among others.

Chao-Hsien Chu is an associate professor of information sciences and technology and the executive director of the Center for Information Assurance at the Pennsylvania State University, University Park, PA. He was previously on the faculty at Iowa State University, Iowa and Baruch College, New York and a visiting professor at University of Tsukuba (Japan) and Hebei University of Technology (China). He is currently on leaves to the Singapore Management University (Singapore) (2005–2006). Dr. Chu received a Ph.D. in Business Administration from Penn State. His current research interests are in communication networks design, information assurance and security (especially in wireless security, intrusion detection, and cyber forensics), intelligent technologies (fuzzy logic, neural network, genetic algorithms, etc.) for data mining (e.g., bioinformatics, privacy preserving) and supply chains integration. His research papers have been published in Decision Sciences, IEEE Transactions on Evolutionary Computation, IIE Transactions, Decision Support Systems, European Journal of Operational Research, Electronic Commerce Research, Expert Systems with Applications, International Journal of Mobile Communications, Journal of Operations Management, International Journal of Production Research, among others. He is currently on the editorial review board for a number of journals.

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Chen, Y., Mullen, T. & Chu, CH. An in-depth analysis of information markets with aggregate uncertainty. Electron Commerce Res 6, 201–221 (2006). https://doi.org/10.1007/s10660-006-6958-9

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  • DOI: https://doi.org/10.1007/s10660-006-6958-9

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