The economist has a
short article on prediction markets, suggesting that they should
be used inside companies a lot more, and that a prime area where they
have been underutilised is in predicting technology trends. They quote
or cite most of the big names in the field.
The main problem with trying to use Prediction Markets to foresee
trends is that you have to ask the right question. Yahoo’s
Tech Buzz game at least has the ability to list several competitors in a field
and let the market predict how they will each do. But so far, I doubt
that is giving more insight than just watching Yahoo’s search ratings
would provide. And it doesn’t help at all when you’re looking for the
next innovation to take off. Before the introduction of the iPod, the
market couldn’t have told you that
Portable Media Devices was a good technology to develop.
The closest example that I know of is
Ely Dahan’s work on Prediction
Markets as a replacement for focus groups. This approach will help if
you’re deploying a product, and want to know what product features
will be valuable, but I don’t think Dely has shown that it can be
successful when you are working on a breakthrough technology; all the
product combinations he’s talked about so far were already widespread
in the market when his groups evaluated them. If the market
participants haven’t seen how the new product would fit in their life,
they may not be able to evaluate it properly.