Chapter 1 - The Hows and Whys of Information Markets
Section snippets
Business Intelligence and Information Markets
The key to any business intelligence (BI) tool is the ability to aggregate information from many disparate sources, summarize it into meaningful measures, and display it appropriately in forms usable by decision makers. The capabilities of BI tools have changed dramatically since the term was first coined by Luhn [1], but the main objective of BI tools is, and will always be, to inform decisions. BI tools can uncover trends or patterns that were previously unknown and improve the quality of
Information Markets Theory Base
To begin, it is important to appreciate the broad base of theory from economics and other sociotechnical disciplines that ground current research and application of information markets.
How Information Markets Work
Information markets, often known variously as prediction markets, decision markets, event markets, and idea futures, are an emerging form of futures markets created to aggregate information, rather than to hedge risks.
Information Markets Applications
While research on information markets has witnessed an exponential growth in the number of published articles in the past 10 years [31], prediction markets have been around for a long time. Betting on political outcomes has a long tradition in the United States, with large and formal markets, such as the New York betting market, operating for over three-quarters of a century [32]. These markets have had a very large volume of activity and a notable predictive accuracy [32].
Today, the IEM, the
Information Aggregation Methods in Information Markets
Organizations employ various methods to elicit forecasts and aggregate information held by members of a group. When the issues at hand are purely factual, statistical groups can be generated by asking a large group of individuals and calculating the statistical mean or median of their answers [44]. However, when the group is anchored by a misleading value for the statistic in question or the group members are ignorant of the issue at hand, the likelihood that the group will decide correctly
The Advantages of Information Markets
Much of the enthusiasm for using information markets as a method of forecasting and information aggregation comes from the inadequacy of existing methods to accomplish this task. Information markets are being used to overcome the limitations of the various aforementioned methods. Green et al. [49] discussed how information markets can avoid the drawbacks of Delphi. First of all, markets are not restricted by experts’ availability; instead, traders self-select to participate in the market if
Research Directions for Information Markets
The many advantages of information markets and their impressive performance in many current applications support great potentials for wide use across many business and technical fields. Studies that test the usefulness of information markets in various application domains and processes are greatly needed. Our extensive literature survey found that research on how information markets are used inside organizations is still in its infancy. Little is known about the impact of the business
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