Freewrite on Prediction Market

. Briefly describe the prediction market.

A prediction market is based on the power of a crowd to offer an extremely accurate prediction based on overwhelming number of votes cast on a single topic. The market aspect is run on various website were you can buy shares of a certain position on a prediction in the hopes of making money. There are some free play website markets

2. The pro and cons of using prediction market compared to the traditional group meeting.

Pros - The prediction markets take a bit of time to flush out an accurate prediction. The accuracy goes up as you increase the number of players and length of time the prediction runs. If a company has the time to allow for a prediction market process to run its course then some valuable insight could be gained.

Cons – In the HBR case a looming emergency recall precluded the use of a prediction market. In fact, in the HBR case it may have caused more harm than good. Prematurely revealing a voluntary recall based on false information and assumption could ensure certain doom for the companies’ product. Management in the case study clearly fell on their sword. The company had the scientific facts backing up the safeness of their product but failed to standby those facts, instead they chose to operate on hearsay, fear, and what ifs. To fully utilize a prediction market in this case the company would have to establish a means to run company surveys; an example is an intranet within the company that has a specific area assigned where company executives could ask question of the employees to gain their insight. The CEO should have relied on the facts and not speculation by an investigator who had a problem at a specific gym and no other location. At that moment the CEO should have acted like a CEO and made the decision. The one mid level executive who offered up the advice to the CEO turn out to be good advice which he should have acted upon. Group think was persuaded by the CEO and the two outliers were coaxed to conform to the company decision.

3. How the prediction produced by the market reflects the wisdom of crowds?

The crowd can produce an accurate prediction based on the number of players involved in the prediction. The more players increase the accuracy of the prediction. The length of time can further increase the accuracy of the prediction by allowing a greater number of players to enter into the prediction. The larger the crowd the less of a working knowledge is required to raise the prediction accuracy. In smaller crowd the crowd must have a working knowledge of the topic in question for an accurate prediction to prevail.