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Design Improved Parimutuel-type Information Aggregation Mechanisms: Inaccuracies and the Long-Shot Bias as Disequilibrium Phenomena

Axelrod, Boris S. and Kulick, Benjamin J. and Plott, Charles R. and Roust , Kevin A. (2007) Design Improved Parimutuel-type Information Aggregation Mechanisms: Inaccuracies and the Long-Shot Bias as Disequilibrium Phenomena. Social Science Working Paper, 1268. California Institute of Technology , Pasadena, CA. (Unpublished) http://resolver.caltech.edu/CaltechAUTHORS:20170728-164034910

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Abstract

Information Aggregation Mechanisms (IAMs) based on parimutuel-type betting systems can aggregate information from complex environments. However, the performance of previously studied systems leaves something to be desired due to possible bluffing, strategic timing of decisions and a so called long shot bias. This paper demonstrates that two modifications of parimutuel systems improve information aggregation performance by removing disinformation due to strategic behavior and by removing misleading disequilibrium behavior. The experiments also demonstrate that the so called long shot bias results from disequilibrium behavior as opposed to having roots in the psychology of the individuals.


Item Type:Report or Paper (Working Paper)
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Additional Information:The financial support of the National Science Foundation is gratefully acknowledged. The comments of David Grether, Colin Camerer, and Robert Sherman have been very helpful. Published as Axelrod, B.S., Kulick, B.J., Plott, C.R., & Roust, K.A. (2009). The design of improved parimutuel-type information aggregation mechanisms: Inaccuracies and the long-shot bias as disequilibrium phenomena. Journal of Economic Behavior & Organization, 69(2), 170-181.
Group:Social Science Working Papers
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Subject Keywords:Information aggregation, Parimutuel, Forecasting
Classification Code:JEL: C92, D44, D71, D8
Record Number:CaltechAUTHORS:20170728-164034910
Persistent URL:http://resolver.caltech.edu/CaltechAUTHORS:20170728-164034910
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:79572
Collection:CaltechAUTHORS
Deposited By: Jacquelyn Bussone
Deposited On:01 Aug 2017 23:21
Last Modified:01 Aug 2017 23:21

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