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Virtual Currency Case Study: Prediction Markets. David M. Pennock Yahoo! Research. Virtual Currency. What actions can be motivated with virtual currency? To what degree of competence? Case study: Prediction markets Epilogue: Designing a better virtual currency.
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Virtual CurrencyCase Study: Prediction Markets David M. Pennock Yahoo! Research
Virtual Currency • What actions can be motivated with virtual currency? • To what degree of competence? • Case study: Prediction markets • Epilogue: Designing a better virtual currency
it would make thingsworse...I would not pay worse... i would not pay I would die immediately.Nobody will pay... Not many people wouldbuy it... less answers... Keep... the Internet free
it would make thingsworse...I would not pay worse... i would not pay I would die immediately.Nobody will pay... Not many people wouldbuy it... less answers... Keep... the Internet free Better (if done right)
Things People Do “For Free” • Provide information • Write software • Label images • Answer questions
WIRED MAGAZINE: ISSUE 16.03 Things People Do “For Free” • Provide information • Write software • Label images • Answer questions
WIRED MAGAZINE: ISSUE 16.03 Things People Do “For Free” • Provide information • Write software • Label images • Answer questions • Provide predictions
Ask The Crowd • Choose what you’d like to predict: • Let people bet on iti.e., Buy or sell share of Bird Flu Outbreak US 2008?(Y/N) I am entitled to: Bird FluUS ’08 Bird FluUS ’08 $1 if $0 if
http://intrade.com Screen capture 2008/03/17
What you can say/learn% chance that Hillary wins GOP wins Texas YHOO stock > 30 Duke wins tourney Oil prices fall Heat index rises Hurricane hits Florida Rains at place/time Where IEM, Intrade.com Intrade.com Stock options market Las Vegas, Betfair Futures market Weather derivatives Insurance company Weatherbill.com The Wisdom of CrowdsBacked in dollars
The Widsom of CrowdsBacked in “Points” • HSX.com • Newsfutures.com • InklingMarkets.com • Foresight Exchange • CasualObserver.net • FTPredict.com • Yahoo!/O’Reilly Tech Buzz • ProTrade.com • StorageMarkets.com • TheSimExchange.com • TheWSX.com • Alexadex, Celebdaq, Cenimar, BetBubble, Betocracy, CrowdIQ, MediaMammon,Owise, PublicGyan, RIMDEX, Smarkets, Trendio, TwoCrowds • http://www.chrisfmasse.com/3/3/markets/#Play-Money_Prediction_Markets
IEM: 237 Candidates HSX: 489 Movies The Wisdom of CrowdsWith Money Without
probabilisticforecasts Real markets vs. market games HSX FX, F1P6 forecast source avg log score F1P6 linear scoring -1.84 F1P6 F1-style scoring -1.82 betting odds -1.86 F1P6 flat scoring -2.03 F1P6 winner scoring -2.32
Experiment 2003 NFL Season ProbabilitySports.com Online football forecasting competition Contestants assess probabilities for each game Quadratic scoring rule ~2,000 “experts”, plus: NewsFutures (play $) Tradesports (real $) Used “last trade” prices Results: Play money and real money performed similarly 6th and 8th respectively Markets beat most of the ~2,000 contestants Average of experts came 39th (caveat) Does money matter? Play vs real, head to head Electronic Markets, Emile Servan-Schreiber, Justin Wolfers, David Pennock and Brian Galebach
Does money matter? Play vs real, head to head Statistically:TS ~ NFNF >> Avg TS > Avg
Discussion • Are incentives for virtual currency strong enough? • Yes (to a degree) • Conjecture: Enough to get what people already know; not enough to motivate independent research • Reduced incentive for information discovery possibly balanced by better interpersonal weighting • Statistical validations show HSX, FX, NF are reliable sources for forecasts • HSX predictions >= expert predictions • Combining sources can help
A Problem w/ Virtual CurrencyPrinting Money Alice1000 Betty1000 Carol1000
A Problem w/ Virtual CurrencyPrinting Money Alice5000 Betty1000 Carol1000
YootlesA Social Currency Alice0 Betty0 Carol0
YootlesA Social Currency I owe you 5 Alice-5 Betty0 Carol5
YootlesA Social Currency I owe you 5 credit: 5 credit: 10 Alice-5 Betty0 Carol5
YootlesA Social Currency I owe you 5 I owe you 5 credit: 5 credit: 10 Alice-5 Betty0 Carol5
YootlesA Social Currency I owe you 5 I owe you 5 credit: 5 credit: 10 Alice3995 Betty0 Carol5
YootlesA Social Currency • For tracking gratitude among friends • A yootle says “thanks, I owe you one”
Talk Bibliography • A. Ghosh, M. Mahdian, D. Reeves, D. Pennock, R. Fugger (2007). Mechanism design on trust networks, Workshop on Internet and Network Economics • E. Servan-Schreiber, J. Wolfers, D.M. Pennock, B. Galebach (2004). Does money matter?, Electronic Markets • D.M. Pennock, S. Lawrence, C.L. Giles, F.Å. Nielsen (2001). The real power of artificial markets. Science, 291(5506), pp. 987-988 • D.M. Pennock, S. Lawrence, F.Å. Nielsen, C. Lee Giles (2001). Extracting collective probabilistic forecasts from web games, Conference on Knowledge Discovery and Data Mining, pp. 174-183