The Promise of Prediction Markets.

The article reports on the use of prediction markets. Prediction markets are forums for trading contracts that yield payments based on the outcome of uncertain events. It is said that there are a lot of evidence that prove that such markets can help to produce forecasts of event outcomes with a lower prediction error than conventional forecasting methods. Prediction markets are said to have been used by decision-makers in the U.S. Department of Defense, the health care industry, and multibillion-dollar corporations. The markets are further said to assist private firms and public institutions in managing economic risks. However, current federal and state laws limiting gambling create significant barriers to the establishment of prediction markets in the United States.