Prediction Markets at Yahoo! David Pennock Yiling Chen, Tej Kasturi, Havi Hoffman, Dan Reeves Chao-Hsien Chu, Sandip Debnath, Mike Dooley, Rael Dornfest,

Prediction Marketsat Yahoo!

David Pennock

Yiling Chen, Tej Kasturi, Havi Hoffman, Dan Reeves

Chao-Hsien Chu, Sandip Debnath, Mike Dooley, Rael Dornfest,Joan Fiegenbaum, Gary Flake, Lance Fortnow, Brian Galebach,Lee Giles, Joe Kilian, Steve Lawrence, Bernard Mangold, Tracy Mullen, Rahul Sami, Emile Servan-Schreiber, Michael Wellman, Justin Wolfers

Prediction markets @ Y!

*not to scale

microeconomics

predictionmarkets

Prediction markets @ Y!

Design Build Analyze

HSXNFTSWSEXFXPS

Case Study I

Design

QuickTime™ and aTIFF (LZW) decompressor

are needed to see this picture.

Analyze

• Dynamic parimutuel

– Market maker

– Cross btw stock market and horse race betting

Build

1

1

1

1

11

1

1

1

11

1

Parimutuel market

.49

.4

.3

0.97.96

.94

.91

.87

.78.59

.82

Dynamic parimutuel market

C(1,2)=2.2

C(2,2)=2.8C(2,3)=3.6

C(2,4)=4.5

C(2,5)=5.4

C(2,6)=6.3

C(2,7)=7.3

C(2,8)=8.2

C(3,8)=8.5

C(4,8)=8.9

C(5,8)=9.4

Share-ratio cost function: C(q1,q2)=q1

2+q22

Properties

•No arbitrage

•pricei/pricej = qi/qj

•pricei < $1

•payoff if right = C/qo > $1



http://buzz.research.yahoo.com

Analysis



Case Study II

Design Build

• Yootopia: Y!Internal economy for favors, predictions, grp decisions











Analyze

More

Design

• Betting mechanisms

– Combinatorics

– Infinite/continuous

– Linear programming backbone

• Market makers

• Applications

Build Analyze

• Computational complexity

• Does money matter?

• Wisdom of crowds: Combining experts

• IOU social network

• Ledger system

• Buzz Game: Tech stock horse race

Documents

Prediction Markets at Yahoo! David Pennock Yiling Chen, Tej Kasturi, Havi Hoffman, Dan Reeves Chao-Hsien Chu, Sandip Debnath, Mike Dooley, Rael Dornfest,