Partition-dependent framing effects in lab and field prediction markets
Abstract
Many psychology experiments show that individually judged probabilities of the same event can vary depending on the partition of the state space (a framing effect called "partition-dependence"). We show that these biases transfer to competitive prediction markets in which multiple informed traders are provided economic incentives to bet on their beliefs about events. We report results of a short controlled lab study, a longer field experiment (betting on the NBA playoffs and the FIFA World Cup), and naturally-occurring trading in macro-economic derivatives. The combined evidence suggests that partition-dependence can exist and persist in lab and field prediction markets.
Additional Information
We thank Justin Wolfers for providing the economic derivatives market data used in Section IV, audiences at Toronto (JDM meeting 2005), Muenster (July 2007), Mannheim (June 2006), Caltech (May 2007), Rome (ESA 2007), Warsaw (SPUDM 2007), and Chicago (October 2007). Thanks to Sera Linardi for feedback. This research was supported by the DFG-grant LA1316/3-1, NSF grant (CRF), the Moore Foundation, NSF-HSD and HSFP grants (CFC).Attached Files
Submitted - SCFL-PartitionDependence_in_PredictionMarkets_vers_2_22_08_1_.pdf
Supplemental Material - SCFL_Appendix_II_1_.pdf
Supplemental Material - SCFL_Appendix_VIII_1_.pdf
Files
Additional details
- Eprint ID
- 22100
- Resolver ID
- CaltechAUTHORS:20110209-161226104
- LA1316/3-1
- Deutsche Forschungsgemeinschaft (DFG)
- NSF
- Gordon and Betty Moore Foundation
- Human Frontier Science Program
- Created
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2011-10-21Created from EPrint's datestamp field
- Updated
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2019-10-03Created from EPrint's last_modified field