The Power of Play: Efficiency and Forecast Accuracy in Web Market Games

AbstractWe analyze the efficiency and forecast accuracy of two market games on the World Wide Web: the Hollywood Stock Exchange (HSX) and the Foresight Exchange (FX). We quantify the degree of arbitrage available on HSX, and compare with a real-money market of a similar nature. We show that prices of HSX movie stocks provide good forecasts of actual box office returns, and that prices of HSX securities in Oscar, Emmy, and Grammy award outcomes constitute accurate assessments of the actual likelihoods that nominees will win. Similar investigations reveal that FX securities prices serve as reliable indicators of uncertain future events. We argue that, in certain circumstances, market simulations can furnish some of the same societal benefits as real markets, and can serve as acceptable substitute testbeds for conducting experiments that would otherwise be difficult or impossible.
Keywordsartificial markets
TypeTechnical report
PublisherNEC Research Institute
AddressPrinceton, New Jersey
SeriesNEC Research Institute Technical Report
ISBN / ISSN2000-168
NoteA brief version appears in Science 291: 987-988, February 9, 2001.
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IMM Group(s)Intelligent Signal Processing