The research report published in December 2005 is part of a larger and long-term research project at the k:lab @ Witten/Herdecke University about information markets. The entire project is sponsored by a large global company and executed by MOSAIG oHG, an academic research- and consulting firm.
The study report “Description & Analysis of Markets” has identified and described markets with information aggregation and forecasting capabilities. Along a newly developed taxonomy for information markets, numerous interviews were conducted and an in-depth secondary research was performed until July 2005. This report was written until October 2005.
The study shows that there are diverse players which use information markets in different contexts. Even though they all aggregate forecasting data one can see that the market differ in their content, design and professionalism.
Download the entire report here
We wish to acknowledge our interview partners and colleagues for sharing their time, expertise and insights with us.
Thanks again to Prof. Robin Hanson, Prof. Ely Dahan, Prof. Martin Spann, Prof. Thomas Gruca, Prof. Justin Wolfers, Dr. Carsten Schmidt, Chris F. Masse, Nick Abrahams (Betfair), Christian Hampp and Atakan Ötztürk (Bluevest), Mike Knesevitch (Trade Exchange Network), Russell Andersen and David Auld (Hedgestreet), Dr. Lutz v. Meyerinck (British Petroleum), Bernardo Huberman and Leslie Fine (Hewlett-Packard), Todd Proebsting (Microsoft), Koichi Yamamoto (Denstu), Rohit Khare and Chris Hibbert (CommerceNet), Ken Kittlitz (Foresight Technologies), Jörg Bochow (Blitztrade), Oliver Glockner (Neopoly), Dr. Emil Servan-Schreiber (NewsFutures) and a few more.
Most of the information relevant for business is scattered across many players – customers, dealers, managers and employees. Everyday in firms all over the globe managers are forced to realize that it is very hard to collect and aggregate them. For example customer satisfaction with a specific service, the expected revenues for a certain product or even the acceptance of management decisions by employees are very hard to measure on a continuous basis. And it is even more complex to predict them.
The objective of this project is the design of a market for trading expectations of future outcomes and thereby aggregating widely scattered data. The prices formed on that market can be interpreted as a precise forecast of future events.
Compared to traditional methods for aggregating distributed information such as customer surveys it can be shown that information markets are more dynamic and efficient. Compared to methods for prediction future outcomes such as time series analysis it has been proved several times that information markets are more precise. As mentioned by an Harvard Business Review article in 2004 those markets have an enormous potential: "Now, imagine that a firm could solve these problems using markets, which may be twice as effective at predicting customer preferences as traditional tools like the focus groups, surveys, and conjoint analysis."
Hewlett-Packard for example was able to forecast its printer revenues more precise with the help of an information market. As a result of being able to dynamically measure and enhancing the prognostic power, some companies – such as Siemens, BP, Intel or Microsoft – were able to realize enormous efficiency improvements. Also quite a few researchers – such as Robin Hanson from George Mason University – firmly believe that those mechanisms will radically change the way companies collect information and forecast: "Markets are likely to revolutionize corporate forecasting and decision making." (Robin Hanson 2003)
Based on a detailed market analysis of existing information markets a multidimensional benchmarking will be developed.
 As a first intermediary result a taxonomy for analyzing information markets can be downloaded here.
The long term objective of this research project is the study of mechanism for information aggregation based on markets and the design of management prognostic tools for corporate forecasting. On the one hand this project will contribute to new academic field of applied experimental economics. On the other hand it will help companies to gather widely distributed information more efficiently and to forecast future events more accurate.
uwh knowledge lab (k:lab)
Research Projekt „Information Markets“
Witten/Herdecke University
Alfred-Herrhausen-Str. 50
58448 Witten, Germany
Bernd Ankenbrand
Email: bernd.ankenbrand@uni-wh.de
Phone: +49 2302 926-578
Fax: +49 2302 926-587
Web: http://www.uni-wh.de/k-lab
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