INFLUENCES ON THE TRUST IN PREDICTION MARKETS

Abstract

Prediction markets are an innovative forecasting method that has proven high prediction accuracy in many areas. The method is, however, far from being established since many organizations are still reluctant to use the method. In particular the trust in the forecast results is a key challenge that negatively impacts the adoption of the method. To get a better understanding of what drives trust in prediction markets we analyzed the perceptions of prediction market users. We identify factors that influence the trust and quantified them in an empirical study. The study is based on user surveys in six experimental prediction markets. The influencing factors were evaluated using a structural equation model. The results demonstrate that participants who are highly engaged and perceive trading in prediction market as exciting and entertaining also put a higher trust in the market results.