1. Research Virtual Currency Case Study: Prediction Markets David M. Pennock Yahoo! Research

2. Research Virtual Currency What actions can be motivated with virtual currency? To what degree of competence? Case study: Prediction markets Epilogue: Designing a better virtual currency

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5. Research worse... i would not pay it would make things worse...I would not pay Not many people would buy it... less answers... I would die immediately. Nobody will pay... Keep... the Internet free

6. Research worse... i would not pay it would make things worse...I would not pay Not many people would buy it... less answers... I would die immediately. Nobody will pay... Keep... the Internet freeBetter (if done right)

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8. Research The Wisdom of Crowds With Money Without

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11. Research Things People Do “For Free” Provide information Write software Label images Answer questions

12. Research Things People Do “For Free” Provide information Write software Label images Answer questions WIRED MAGAZINE: ISSUE 16.03

13. Research Things People Do “For Free” Provide information Write software Label images Answer questions Provide predictions WIRED MAGAZINE: ISSUE 16.03

14. Research Ask The Crowd Choose what you’d like to predict: Let people bet on it i.e., Buy or sell share of $1 if$0 if I am entitled to: Bird Flu Outbreak US 2008? (Y/N) Bird Flu US ’08

15. Research http://intrade.com Screen capture 2008/03/17

16. Research The Wisdom of Crowds Backed in dollars What you can say/learn % chance that Hillary wins GOP wins Texas YHOO stock > 30 Duke wins tourney Oil prices fall Heat index rises Hurricane hits Florida Rains at place/time Where IEM, Intrade.com Intrade.com Stock options market Las Vegas, Betfair Futures market Weather derivatives Insurance company Weatherbill.com

17. Research The Wisdom of Crowds With Money Without

18. Research The Widsom of Crowds Backed in “Points” HSX.com Newsfutures.com InklingMarkets.com Foresight Exchange CasualObserver.net FTPredict.com Yahoo!/O’Reilly Tech Buzz ProTrade.com StorageMarkets.com TheSimExchange.com TheWSX.com Alexadex, Celebdaq, Cenimar, BetBubble, Betocracy, CrowdIQ, MediaMammon,Owise, PublicGyan, RIMDEX, Smarkets, Trendio, TwoCrowds http://www.chrisfmasse.com/3/3/markets/#Play-Money_Prediction_Markets

19. Research The Wisdom of Crowds With Money Without IEM: 237 CandidatesHSX: 489 Movies

20. Research The Wisdom of Crowds With Money Without

21. Research Real markets vs. market games HSXFX, F1P6 probabilistic forecasts forecast sourceavg log score F1P6 linear scoring-1.84 F1P6 F1-style scoring-1.82 betting odds-1.86 F1P6 flat scoring-2.03 F1P6 winner scoring-2.32

22. Research Does money matter? Play vs real, head to head Experiment 2003 NFL Season ProbabilitySports.com Online football forecasting competition Contestants assess probabilities for each game Quadratic scoring rule ~2,000 “experts”, plus: NewsFutures (play $) Tradesports (real $) Used “last trade” prices Results: Play money and real money performed similarly 6 th and 8 th respectively Markets beat most of the ~2,000 contestants Average of experts came 39 th (caveat) Electronic Markets, Emile Servan- Schreiber, Justin Wolfers, David Pennock and Brian Galebach

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24. Research Does money matter? Play vs real, head to head Statistically: TS ~ NF NF >> Avg TS > Avg

25. Research Discussion Are incentives for virtual currency strong enough? Yes (to a degree) Conjecture: Enough to get what people already know; not enough to motivate independent research Reduced incentive for information discovery possibly balanced by better interpersonal weighting Statistical validations show HSX, FX, NF are reliable sources for forecasts HSX predictions >= expert predictions Combining sources can help

26. Research A Problem w/ Virtual Currency Printing Money Alice 1000 Betty 1000 Carol 1000

27. Research A Problem w/ Virtual Currency Printing Money Alice 5000 Betty 1000 Carol 1000

28. Research Yootles A Social Currency Alice 0 Betty 0 Carol 0

29. Research Yootles A Social Currency I owe you 5 Alice -5 Betty 0 Carol 5

30. Research Yootles A Social Currency credit: 5credit: 10 I owe you 5 Alice -5 Betty 0 Carol 5

31. Research Yootles A Social Currency credit: 5credit: 10 I owe you 5 Alice -5 Betty 0 Carol 5

32. Research Yootles A Social Currency credit: 5credit: 10 I owe you 5 Alice 3995 Betty 0 Carol 5

33. Research Yootles A Social Currency For tracking gratitude among friends A yootle says “thanks, I owe you one”

34. Research New Prediction Game

35. Research A. Ghosh, M. Mahdian, D. Reeves, D. Pennock, R. Fugger (2007). Mechanism design on trust networks, Workshop on Internet and Network Economics E. Servan-Schreiber, J. Wolfers, D.M. Pennock, B. Galebach (2004). Does money matter?, Electronic Markets D.M. Pennock, S. Lawrence, C.L. Giles, F.Å. Nielsen (2001). The real power of artificial markets. Science, 291(5506), pp. 987-988 D.M. Pennock, S. Lawrence, F.Å. Nielsen, C. Lee Giles (2001). Extracting collective probabilistic forecasts from web games, Conference on Knowledge Discovery and Data Mining, pp. 174-183 Talk Bibliography