Andrew Leigh has a post on predictions markets as applied to the Australian election and a recent article outlining prediction markets with Justin Wolfers can be found on his ANU page.
As far as I know, prediction markets have been used in several multinationals (e.g. HP, Google, Corning, Siemens, Yahoo) but I am not aware of any deployments in Australia. Does anyone know of any examples where local organisations have dip their toe in this particular pool?
Source: Luke
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I think what's more prevalent is the use of Decision Tree Analysis (DTA) which is used a fair bit to measure the probability of various outcomes. Though its most popular use seems to be from customer mapping through a series of decisions. Say for example in a call centre.
If customer does A then they are more likely to to C & D. If a customer does B they are more likely to do E. That kind of measurement of likely paths, based on what people have done in the past is a staple of data mining. You can then put a best fit predictive analysis on new customers - giving then options that they are more likely to do, faster.
I think these are two very different things Dan. A decision tree is about the likelihood of an actor doing B & C if they have done A.
A prediction market is different. It aggregates individual predictions of some macro event (e.g. the outcome of an election or the probability of meeting a divisional sales forecast) that is not under the control of an individual. The idea being that these aggregated predictions will be more accurate than a decision made by an individual.
This only holds if one individual does not have privileged information.
Also DTA works from known probabilities based previous behaviour. A prediction market works in highly ambiguous environments. It's reasonable to say "60% of customers who bought A then bought B". It is far less useful to say: "The ALP have a 40% chance of winning the next election".
Matt - you might be interested in a piece by Andrew Leigh and justin Wolfers just published on the use of prediction markets in Australia
http://www.onlineopinion.com.au/view.asp?article=5995
Luke - Thanks. This is a reprint of an old article & good, solid stuff BUT where are the specifically Australian corporate examples - equivalents to Yahoo, Google, Corning, HP etc?
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