Nov. 7, 2006 — Web-based maps of the United States that dynamically update predictions for the 2006 gubernatorial and senate races could prove more accurate than maps based on opinion polls.
The election maps are the first based on prediction markets. These markets are artificially created and work like the stock exchange — people get rewarded or punished financially for their decisions to buy or sell assets.
The current price of each asset (for example, whether a team will win a certain game or whether a candidate will win a particular race) determines its value and the likelihood of its outcome.
Lance Fortnow, a professor in computer science at the University of Chicago, and team members David Pennock and Yiling Chen of Yahoo! Research in Berkeley, based their maps on the values of election assets being traded for real money on the Dublin-based entertainment website Tradesports.com.
In 2004, values for election assets on Tradesports.com correctly predicted every state's Electoral College outcome and all but one of the races for the Senate, said Fortnow.
Traditionally election predictions have come from opinion polls. But polling doesn't necessarily get to the truth. The questions can be skewed to lead a person to unintentional answers.
People who are not informed about a particular issue may be afraid to admit it and provide dishonest answers. Or, sometimes they will admit it, thereby creating some uncertainty in the final results.
But in a prediction market, only the best and strongest opinions make the most money.
"People tend to be more honest about their opinions when you actually put real money on the table," said Fortnow.
