A prediction market is a speculative market “created for the purpose of making predictions”, according to Wikipedia. OK, that definition doesn’t exactly spell out the concept very well, so here’s my understanding of this term: a prediction market provides its users with a means of betting or speculating on the outcome of predictions regarding future events, such as who will win a presidential election or exactly when humans will first set foot on Mars. It’s a bit like opening up the future to the “wisdom of crowds” (see James Surowiecki’s book on this topic), allowing a large group of people to collectively speculate on the likely outcome of a future event, even “intangibles” such as the popularity of a novel or film yet to be released. The act of speculation can add a monetary value to the event, allowing it to be further traded, just like any other commodity.
In a learning and teaching context, prediction markets have been used to speculate on the uptake of communication technologies in tertiary institutions. Bryan Alexander, a contributor to the Educause Review recently wrote an article about research into predictive markets in Higher education. As research director for the US National Institute for Technology and Liberal Education (NITLE), Bryan reported on a web-based gaming approach that explored “propositions” on future events beginning in 2008. One example proposition asked about smartphone platforms and their presence on campuses. Gamers were asked to predict
“Which smartphone or smartphone platform will be the most popular for campus-supported teaching and learning projects by May 2009: iPhone, Android, Blackberry, Palm Pre?”.
NITLE is a non-profit community-based initiative located at Southwestern University in Austin, Texas that is dedicated to helping “educational organizations use technology effectively to strengthen undergraduate education”. According to its homepage NITLE allows participants to “use a market system to learn about emergent practices for higher education”. All participants are initially given $5000 virtual dollars to use for buying shares in one part of a proposition, or to start a market of their own. In the example quoted above, for example, the iPhone attracted a share price of $50.95 (which equates to a probability of 50.95% that it would be the market leader) by the time the proposition closed in May, 2009.
While this level of educational gaming using share-trading seems a natural for any US-based institution, the list of participating institutions and universities is impressive, including Yale, Vassar, Georgetown University, Chicago University and Brandeis.