6533b860fe1ef96bd12c3980
RESEARCH PRODUCT
Risk aversion in prediction markets: A framed-field experiment
Robert DonzeIrene ComeigBéatrice Boulu-reshefGregory D. Weisssubject
MarketingSelf-confidence050208 financePrice differenceActuarial scienceBasketballRisk aversionmedia_common.quotation_subject05 social sciencesEconomic agentsRisk aversionExperimental economicsField experimentsPrediction market[SHS.ECO]Humanities and Social Sciences/Economics and FinanceSelf-confidenceExperimental economics0502 economics and businessEconomics[SHS.GESTION]Humanities and Social Sciences/Business administration050207 economicsPrediction marketsComputingMilieux_MISCELLANEOUSmedia_commonEvent (probability theory)description
International audience; To make better decisions today, companies and other economic agents are interested in getting accurate predictions of future events. Prediction markets can, at least potentially, give those accurate forecasts for the probability of the event by aggregating information from traders. However, formal studies highlight that the risk attitudes of market participants may bias the market equilibrium prices, and consequently make the prediction unreliable. This research examines the effect of participants' risk attitudes on prediction market prices, through a framed field experiment on the two semifinals at the 2015 NCAA Men's Division Basketball Tournament. The results of the experiment show a significant price difference between the risk-averse group and the less risk-averse group. The large price discrepancy between markets with participants with varying risk aversion suggests that risk aversion deserves a critical consideration in future prediction-market research and implementation.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2016-11-01 |