December 6, 2005

Zocalo replay

Prediction Markets By: ams

The Prediction Market Summit
that CommerceNet sponsored in San Francisco last week was quite a
success. There were 9 speakers, including four that I hadn’t heard
before. I’ll have more to say about the talks and I’d like to post
some of the pictures I took, but I’m going to have to dole it out over
several days so I can get other work done. The first thing I want to
take care of is posting my slides. I dropped out of PowerPoint
twice, so I want to make a version of those exhibits that I can
present with the slides. The first time I
dropped out of PowerPoint was to show a replay of a session of an
experiment the folks at GMU ran using Zocalo in early November.

In the experiment, forecasters watch the market interaction, and try
to decide whether the value of the tickets being traded is 0 or 100.
4 pure traders and 4 manipulators are active in the market. Each
starts out with two tickets and 200 units of currency. Both the
traders and the manipulators have each been given a hint (the hints
are true with 2/3 chance) as to the actual value of the tickets. The
manipulators have an additional incentive to make the forecasters
believe that the asset has one value or another. Sometimes the
incentive is consistent with the hint, sometimes not.

You can see the replay here.
The javascript that drives it only works in FireFox, so you won’t be
able to view it with other browsers. (I will look into getting a quicktime or other movie made.) The image above displays the
contents of the order book (green and orange dots) at the time of each
transaction (black dots). The UI that the experimental subjects see only
shows the current contents of the order book. Notice that the order book in the center of the screen updates along with the colored dots in the strip chart. The “immediate order” buttons are updated as orders are entered and filled.

I created the depiction
above in hopes that the extra context it gives would be useful for
figuring out how much interest there is on each side of the market.

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