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Prediction Market at FF (karma: 6) en>fr fr>en
By shon

Comments: 594, member since Thu Mar 11, 1999

On Fri May 18, 2007 07:09 AM

Today, we're going to unveil the new FF prediction market. It's basically a way to put your karma where your mouth is.

From Wikipedia:

Prediction markets are speculative markets created for the purpose of making predictions. Assets are created whose final cash value is tied to a particular event (e.g., will the next US president be a Republican) or parameter (e.g., total sales next quarter). The current market prices can then be interpreted as predictions of the probability of the event or the expected value of the parameter. Other names for prediction markets include information markets, decision markets, idea futures, event derivatives, and virtual markets.

The FF prediction market won't use cash, but karma. You can think of it as a poll where voting costs you one daily karma. You can only take one position in a given event, but you can buy more than one vote (up to your currently available daily karma). The people who voted for the winning option get all the karma from the losers.

For example, one prediction event might be:

Hillary will get the 2008 democratic nomation.

Two options:
Pro and con

Suppose people bought 100 pro options, and 50 con options. (You can only buy one type of option, so you can't buy both a pro and a con.)

Then if Hillary gets the nomination, the 50 con options are worth 50 karma, and these are divided up and given to the pro side who correctly predicted that event.

The winning karma is kept in a new record called prediction karma, and we'll have a separate leaderboard for the best predictors.

We get to alpha test this new software feature before any other XP sites, so it should be interesting to see what kinds of predictions people will make.

We're starting off with a few standard categories like: politics, sports, finance, FF, etc. Anybody can create a new prediction event, but a moderator must approve all new events. This is to ensure that it has a proper ending condition when there are more than two options available.

For example, if you create an event like this: Who will win the 2008 US presidential election? And you only provide 4 candidates, but none of them actually win, then that's a bad event. In that case, adding an "other" option would make it work.

Predictions have a deadline date by which the event must occur. For sports related predictions, this is usually the beginning of the game. A moderator would then close out that prediction at the end of the game and indicate which team won.

For events that may or may not happen (eg., Israel will bomb Iran's nuclear reactor by December 1, 2007 with Pro and Con options), a moderator will need to close out the event if it occurs before the deadline, or when the deadline hits and the event didn't occur. Options bought after the prediction happened will be voided with no refund given.

To make it meaningful, it will cost you your daily karma to buy options. This means people will have to decide between karmatizing comments or buying options in the prediction market, since both will use up your daily karma. If this restriction prevents adequate enjoyment of the market, then we might try something different later.

When it goes live later, the link to use will be: www.fuckfrance.com . . .

(I'll update this message when it goes live.)

Have fun and let me know if you have any ideas or suggestions. We're planning on adding stats tracking to see how successful people are predicting events, etc.

Shon

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