Live Blogging from WebKDD 2008
An Empirical Study of Dynamic Pari-mutuel Markets: Evidence from the Tech Buzz Game
Yiling Chen, David Pennock, and Tejaswi Kasturi
Presented by Dr. Dave Pennock
Tech buzz game uses the wisdom of the crowds and people can 'bet' on events like: "Bird flu outbreak in UK in 2008" etc. An example of a prediction market that David talks about is InTrade and there are tons of other clones out there: Hollywood stock exchange etc. Pretty amazing some of the prediction accuracies that are shown in some of the examples.
Parimutuel markets: All the money goes into one pool and there is a (Zero sum) wagering game in play an winnings are shared equally. In dynamic parimutuel markets (DPM) the entry price changes as more people purchase the share (for either outcomes) in the pie. There is a cost function associated with each purchase price. C(q1,q) = sqrt(q1^2+q2^2). It has a nice property that the ratio of prices is same as ratio of shares.
This idea was used behind the Yahoo! Tech buzz game which was an amazingly cool site, if you remember. It still amazes me how much folks would do for fake money or points! Some research strategies presented for DPM as a prediction mechanism:
- Baseline: Implemented using robot traders buying and selling at random. Ofcourse the robot lost a lot of 'fake money'.
- Sophisticated vs. naive traders: myopic trading -- just decide based on immediate situation and not future.
- Crime pays: people open false accounts and move money from one account to another to add up the signup money.
- For 352 stocks prediction converges to the actual value/outcome closer to the cash out event.
- Markets were pretty accurate in determining the actual buzz (as measured using query logs)
Very cool! Watchout for a new prediction game called Yoopick, a sports prediction game! Here you can predict not just the outcome but the actual score ranges.