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Prediction markets Definition

Prediction markets are speculative markets in which participants buy and sell prediction shares of whatever is trying to be predicted. The current market prices can then be interpreted as predictions of the probability of the event or the expected value of the parameter. Also known as predictive markets, information markets, decision markets, idea futures or virtual markets.

Prediction markets are platforms where participants trade shares or place bets on future outcomes, such as product success, campaign performance or market trends. These markets aggregate the collective intelligence of a group, generating forecasts that can be more accurate than traditional research methods.

What are key aspects of prediction markets in marketing research?

• Participants “trade” on future outcomes (e.g., success of a new product).
• Market prices reflect collective expectations and probabilities.
• Relies on the wisdom of crowds and diverse insights.
• Incentivized participation improves engagement and accuracy.
• Can be run internally (with employees) or externally (with consumers).
• Often used alongside other forecasting tools.

Why are prediction markets important in market research?

Prediction markets offer a dynamic, real-time method for forecasting market behavior and evaluating potential outcomes. They tap into diverse perspectives, reduce individual bias and often outperform traditional survey-based forecasting by simulating real-world decision dynamics.

Who relies on prediction markets in marketing research?

• Innovation teams testing new product concepts.
• Brand managers evaluating campaign potential.
• Corporate strategy departments seeking market forecasts.
• R&D teams assessing commercial viability.
• Market researchers complementing traditional methods.
• Executives monitoring internal sentiment on company initiatives.

How do market researchers use prediction markets?

Market researchers use prediction markets to gather forward-looking insights by creating environments where participants "invest" in outcomes they believe will occur, such as the success of a new product or consumer response to an ad. These platforms mirror real market dynamics, enabling researchers to assess the perceived likelihood of different scenarios based on aggregated crowd sentiment. Participants – who may be consumers, employees or expert panels – are incentivized to provide thoughtful predictions and the resulting market prices reflect collective confidence in each outcome. This method is particularly valuable for high-stakes decisions where traditional research may lack predictive power or speed.