Google Prediction Markets Essay

1452 Words Jun 9th, 2011 6 Pages
Part I:

Briefly evaluate how Google’s Prediction Markets have worked to date. To what extent have the markets been successful or unsuccessful? 250
When the five Googlers got together to start with this project, their main objective was to launch an internal prediction market and test if crowds would make more accurate predictions than individuals’. To determine if this project was a success or not we need to determine our parameters of success. Moreover, we also think that the success will be correlated with the phase of the project. From the case we can see that this project is still going through its first steps, despite the system has been running for seven quarters. To measure success, we need to evaluate; first, how accurately the
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Endorsement effect. By default, the decision makers will tend to continue with what they are actually doing (if the market is not diverse enough this bias cannot be corrected, if everyone asked is in Goggle then they might be influenced by this type of bias).

Under what conditions are prediction markets most likely to perform relatively well and relatively poorly? 417
Efficient functioning of prediction markets, within the context of a corporation like Google, would depend on the following three aspects:

a) Volume of participants: By the nature of market-based decision-making, we would need large and diverse set of participants. Larger participation set will eliminate various biases discussed earlier. Liquidity (ability to trade) will allow participants to calibrate their bets and decisions based on new information.

b) Diversity: Diversity of thought, perspective and motives within the participation set is also very important for prediction markets. Google should encourage participation from different geographies, different teams, varied level of seniority and demographics. This will create a market where participants interpret information and signals in different ways so that the collective action normalizes for any bias. This diversity will eliminate any overconfidence in decision-making and will provide a valuable “outsider” view. The issue of diversity is quite important in closed markets (e.g. Google). This issue is amplified when…

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