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Arrow KJ, Forsythe R, Gorham M, Hahn R, Hanson R, Ledyard JO, Levmore S, Litan R, Milgrom P, Nelson FD, Neumann GR, Ottaviani M, Schelling TC, Shiller RJ, Smith VL, Snowberg E, Sunstein CR, Tetlock PC, Tetlock PE, Varian HR, Wolfers J, Zitzewitz E. The Promise of Prediction Markets. Science 2008; 320:877-8. [DOI: 10.1126/science.1157679] [Citation(s) in RCA: 183] [Impact Index Per Article: 11.4] [Reference Citation Analysis] [What about the content of this article? (0)] [Affiliation(s)] [Track Full Text] [Journal Information] [Subscribe] [Scholar Register] [Indexed: 11/02/2022]
Affiliation(s)
- Kenneth J. Arrow
- Department of Economics, Stanford University, Stanford, CA 94305, USA
| | - Robert Forsythe
- College of Business, University of South Florida, Tampa, FL 33620, USA
| | - Michael Gorham
- Stuart School of Business, Illnois Institute of Technology, Chicago, IL 60661, USA
| | - Robert Hahn
- Reg-Markets Center at American Enterprise Institute, Washington, DC 20036, USA
| | - Robin Hanson
- Department of Economics, George Mason University, Fairfax, VA 22030, USA
| | - John O. Ledyard
- Department of Economics, California Institute of Technology, Pasadena, CA 91125, USA
| | - Saul Levmore
- University of Chicago Law School, Chicago, IL 60637, USA
| | | | - Paul Milgrom
- Department of Economics, Stanford University, Stanford, CA 94305, USA
| | - Forrest D. Nelson
- Department of Economics, University of Iowa, Iowa City, IA 52242, USA
| | - George R. Neumann
- Department of Economics, University of Iowa, Iowa City, IA 52242, USA
| | - Marco Ottaviani
- Kellogg Graduate School of Management, Northwestern University, Evanston, IL 60208, USA
| | - Thomas C. Schelling
- School of Public Policy, University of Maryland, College Park, MD 20742, USA
| | | | | | - Erik Snowberg
- Graduate School of Business, Stanford University, Stanford, CA 94305, USA
| | | | | | - Philip E. Tetlock
- Haas School of Business, University of California, Berkeley, CA 94720, USA
| | - Hal R. Varian
- School of Information, University of California, Berkeley, CA 94720, USA
| | - Justin Wolfers
- The Wharton School, University of Pennsylvania, Philadelphia, PA 19104, USA
| | - Eric Zitzewitz
- Department of Economics, Dartmouth College, Hanover, NH 03755, USA
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Banks JS, Ledyard JO, Porter DP. Allocating uncertain and unresponsive resources: an experimental approach. Rand J Econ 1989; 20:1-25. [PMID: 10296624] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [What about the content of this article? (0)] [Abstract] [MESH Headings] [Subscribe] [Scholar Register] [Indexed: 05/23/2023]
Abstract
We identify an important class of economic problems that arise naturally in several applications: the allocation of multiple resources when there are uncertainties in demand or supply, unresponsive supplies (no inventories and fixed capacities), and significant demand indivisibilities (rigidities). Examples of such problems include: scheduling job shops, airports, or supercomputers; zero-inventory planning; and the allocation and pricing of NASA's planned Space Station. Using experimental methods, we show that the two most common organizations used to deal with this problem, markets and administrative procedures, can perform at very low efficiencies (60-65% efficiency in a seemingly robust example). Thus, there is a need to design new mechanisms that more efficiently allocate resources in these environments. We develop and analyze two mechanisms that arise naturally from auctions used to allocate single-dimensional goods. These new mechanisms involve computer-assisted coordination made possible by the existence of networked computers. Both mechanisms significantly improve on the performance of administrative and market procedures.
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