Briefs

Prediction markets have some smart things to say about everything from DRAM prices to when Microsoft software will be finished.

Tech turns to prediction markets

By Declan McCullagh, CNET News.com, December 14, 2006

SUNNYVALE, Calif.--In a 1945 paper, the great Austrian economist F.A. Hayek described how prices set by a free market are really "a mechanism for communicating information" about the probability of future events.

If a war in the Middle East is seen as likely, for instance, oil prices will probably increase. Hayek's insight showed that the results can be surprisingly accurate, as long as enough people are allowed to wager real money on the outcome. Prediction markets

Now, technology firms are using a modern twist on this idea, called prediction markets, as a way to save money, harness the distributed knowledge of their rank-and-file employees, and even answer questions like: When will this software ship? And what will memory prices be like in a few months?

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