Draft:Foresight Exchange
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Foresight Exchange (FX) is a prediction market that uses play money to forecast the outcomes of future events, particularly questions involving science, technology, and other areas of public interest. It was established in 1994 and is associated with the development of the idea futures concept proposed by economist Robin Hanson.[1][2]
History
[edit]The Foresight Exchange originated in 1994 from work associated with Robin Hanson on markets for "idea futures", in which participants could trade claims concerning future events. Early versions used electronic communication and play money, and the market subsequently operated on the World Wide Web.[3][4]
The market became one of the examples used in academic research into online prediction markets and artificial markets. Researchers have described it as a play-money market in which participants trade contracts concerning unresolved scientific and societal questions.[5]
Market and forecasting method
[edit]The Foresight Exchange uses contracts representing propositions about future events. Participants buy and sell the contracts using a virtual currency rather than real money. The prices of contracts can therefore be interpreted as collective probability assessments of the events specified by the contracts, subject to the limitations of prediction-market prices and the structure of the market.[6]
The subjects of contracts have included scientific and technological developments as well as political, economic, social, and other future events. Academic descriptions of the market have noted its emphasis on long-term questions compared with many prediction markets that focus on relatively short-term events.[2][3]
Research
[edit]The Foresight Exchange has been used as a data source in research into the predictive accuracy of play-money markets. In a 2001 study published in Science, David Pennock, Steve Lawrence, C. Lee Giles and Finn Årup Nielsen examined historical Foresight Exchange prices for 161 expired binary securities. They compared market prices recorded 30 days before expiration with the subsequent outcomes of the corresponding claims and reported a strong relationship between the two measures.[5]
The researchers subsequently included the Foresight Exchange in a broader study of online games and artificial markets published in the proceedings of the ACM SIGKDD conference. The study examined data from the Foresight Exchange, the Hollywood Stock Exchange, and a Formula One prediction game and concluded that these sources could produce useful probabilistic forecasts of uncertain future events.[6]
The market has also been discussed in research on long-term forecasting. Academic work has described the Foresight Exchange as an online play-money prediction market aimed at forecasting events with relatively long time horizons and has examined whether its historical prices corresponded with observed outcome frequencies.[2]
Scientific and technological questions
[edit]The Foresight Exchange has been particularly associated with questions concerning science and technology. A 2008 article in American Scientist described it as one of the pioneering prediction markets and discussed contracts concerning scientific questions, including the likelihood of particular astronomical discoveries.[7]
Its use for scientific questions has also been discussed in legal scholarship concerning the potential use of prediction markets to aggregate information about scientific claims. Tom W. Bell's 2002 article in the Chapman Law Review described the Foresight Exchange as a play-money market operating on the World Wide Web since 1994 and examined its significance as an example of markets for scientific propositions.[1]
See also
[edit]References
[edit]- 1 2 Bell, Tom W. (2002). "Gambling for the Good, Trading for the Future: The Legality of Markets in Science Claims". Chapman Law Review. 5 (1): 159–180.
- 1 2 3 Gräfe, Andreas (2009). Prediction Markets versus Alternative Methods. Karlsruhe Institute of Technology.
- 1 2 Cherry, Miriam A.; Robert L. Rogers (2006). "Markets for Markets: Origins and Subjects of Information Markets". Rutgers Law Review. 58 (2): 339–386.
- ↑ Hanson, Robin (2001). "Information Markets to Estimate Military Instability". George Mason University.
{{cite web}}: Missing or empty|url=(help) - 1 2 Pennock, David M.; Steve Lawrence; C. Lee Giles; Finn Årup Nielsen (2001). "The Real Power of Artificial Markets". Science. 291 (5506): 987–988. doi:10.1126/science.291.5506.987.
- 1 2 Pennock, David M.; Steve Lawrence; Finn Årup Nielsen; C. Lee Giles (2001). "Extracting Collective Probabilistic Forecasts from Web Games". Proceedings of the Seventh ACM SIGKDD International Conference on Knowledge Discovery and Data Mining. Association for Computing Machinery. pp. 174–183. doi:10.1145/502512.502537.
- ↑ Schneider, David (2008). "A Market for Basic Science?". American Scientist. 96 (3): 203–204. doi:10.1511/2008.71.203.
Category:Prediction markets Category:Online games Category:Virtual economies
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