Economic Culture and Prediction Markets
Khalid N. Alhayyan, Rosann W. Collins, Joni L. Jones, Donald J. Berndt
How do individual characteristics, such as economic culture, influence the trading behaviors and the acceptance of any consensus reached through prediction market mechanisms? This research explores variations in the usage of prediction (or information) markets that are explained by some of the traders‟ cultural differences. Four forms of capitalism: state-guided, oligarchic, big-firm, and entrepreneurial, proposed by Baumol et al, are employed to capture aspects of traders‟ differences. To assess participants‟ economic culture along the spectrum of capitalist forms a survey instrument has been developed, validated, and tested. Moreover, several concepts related to trading participation, trading patterns, trader‟s overall performance and trader‟s acceptance of market outcomes are described and hypothesized against the economic culture forms. A series of research questions are proposed that explore how trader economic culture may affect prediction market use. The research landscape specified by Jones et al. is extended to recognize the potential differences between trader and market outcomes.