Tuesday, July 31, 2007

Kling agrees that prediction markets outperform surveys

Suppose that instead of ratings, you asked consumers to vote with dollars. For any movie, a consumer who owns the movie can post an "ask" price and a consumer who does not own the movie can post a "bid" price. To ensure that these prices are real, every once in a while, you would fill all the orders for a particular customer--that is, you would buy the consumers' DVD's at her asking prices and sell her DVD's at her bid prices.
Welcome to the club, Arnold.

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