Will the Brazilians win?

World Cup champions determined on prediction market

On the Inkling Market, which is a place to experiment with a promising technology called Prediction Markets, Brazil was the clear winner of the 2010 World Cup. There is every reason to take the forecast seriously - it is more accurate than that of experts and bookmakers.

“Prediction markets make it possible to obtain new knowledge in an absolutely original, hitherto unknown and incomparable way,” says the chairman of the League of Independent IT Experts (LINEX), a well-known Russian IT specialist Sergei Karelov. Inkling Market is experimenting with this latest technology, which truly demonstrates previously unattainable forecast accuracy.

The effectiveness of prediction markets is explained by a theorem proven back in 1785 by the Marquis de Condorcet (the so-called Condorcet jury theorem). Its meaning is as follows: as the number of speakers increases and provided that each speaker is able to give the correct conclusion with a probability of more than 50%, the probability that the majority of speakers will give the correct conclusion tends to 100%.

The opportunity to apply this knowledge for practical purposes has appeared thanks to the Internet - previously it was impossible to simultaneously involve a sufficient number of people to organize a prediction market.

In the phrase “prediction market,” the word “market” has a literal meaning. This is truly a speculative market in which participants pay by betting on the accuracy of their prediction. Those. acquires an asset, the price of which depends on how successful the investment turns out to be. Correctly predicted the event - the price of your asset is high and, therefore, you earned in proportion to your investment. I was mistaken - there is no income, but, on the contrary, there are financial losses. Without such a trivial incentive as money, the prediction market, as tested in practice, does not work at its full potential.

The impression that the prediction market is no different from a bookmaker's office is erroneous. This is not a sweepstakes - unlike a sweepstakes, the prediction market system is not closed, but open. Companies, using the prediction market, would be happy to know the future (for example, the actual completion time of an expensive project like the Airbus A400 military transport aircraft, which went billions of euros over budget due to missed deadlines), encouraging the participation of as many people as possible. However, the commercial use of prediction markets in the US, for example, is prohibited by law. The legislator is afraid of letting the genie out of the bottle: prediction markets are too efficient and therefore potentially dangerous.

But experimental projects like Inkling Market exist, showing impressive achievements. There is no real money here, only fictitious money. Nevertheless, participants in even a conventional prediction market, acting out of purely sporting (and not mercantile) interest, demonstrate convincing results. For example, the error of the amateur market in predicting the results of the last US presidential election in all states turned out to be much less than Gallup's error (1.5% versus 2.4).

Another example of this type of resource is the Hollywood Stock Exchange website. It, like Inkling Market, is a virtual (no real money) prediction market that has been predicting Oscar winners in seven out of eight categories for the past three years. None of the film critics and film market experts can do this.

But let's get back to football. At the time of writing, Brazil's chances, according to Inkling Market, were more than twice (29.1% versus 14.4) those of its closest rival, the Spanish national team. Since the beginning of the tournament, however, Argentina, Germany, and Holland have all taken second place in turn - the overwhelming superiority of Brazil has remained and remains a constant factor. So the statement “the Brazilian team will take the World Cup for the sixth time” can be considered true with a high probability.





Prepared jointly with RIA Novosti

Andrey ANNENKOV, RIA Novosti, - specially for Vremya Novosti