Manipulation and (mis)trust in prediction markets
Choo, L; Kaplan, TR; Zultan, R
Date: 7 January 2022
Journal
Management Science
Publisher
INFORMS
Publisher DOI
Abstract
Markets are increasingly used as information aggregation mechanisms to predict future events. If policy makers and managers use markets to guide policyandmanagerialdecisions,interestedpartiesmayattempttomanipulate the market in order to influence decisions. We study experimentally the willingness of managers to base decisions on market ...
Markets are increasingly used as information aggregation mechanisms to predict future events. If policy makers and managers use markets to guide policyandmanagerialdecisions,interestedpartiesmayattempttomanipulate the market in order to influence decisions. We study experimentally the willingness of managers to base decisions on market information under the shadow of manipulation. We find that when there are manipulators in the market, managers under-utilize the information revealed in prices. Furthermore, mere suspicion of manipulation erodes trust in the market, leading to the implementation of suboptimal policies—even without actual manipulation.
Economics
Faculty of Environment, Science and Economy
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