Prediction Markets for Defense Acquisition: The Devil is in the Details

Abstract

Asset Value and Market Prices as Predictors * Two dimensions of value for any asset/contract: -- Arbitrage value: Potential financial benefit from reselling asset/contract at a higher price at a later date -- Intrinsic value: Expected financial benefit of holding the asset/contract indefinitely (or until market closes) * Many people think about the value of stocks in the stock market only in terms of the arbitrage value * Prediction markets provide reasonable predictions only when prices reflect estimate of intrinsic value * Thus, assets and markets must be designed to direct focus toward intrinsic value.

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Document Details

Document Type
Technical Report
Publication Date
May 01, 2010
Accession Number
ADA529383

Entities

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  • Bill Gates
  • Jeremy Arkes
  • Noah Myung
  • Pete Coughlan

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  • Naval Postgraduate School

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  • Human Systems

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  • Industrial Economics
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