Prediction markets overestimate how often people meet their own goals
Crowds Believe in You: Online Prediction Markets Overestimate How Often People Achieve Their Own Goals
Human-Computer InteractionComputers and SocietySocial and Information Networks
Summary
People often share personal goals online and ask others to predict if they will achieve them. The authors studied prediction markets where people bet on their own future actions and found these markets tend to be too optimistic. These markets were less accurate at predicting personal success than markets predicting external events. The optimism grew as the deadline approached and was mainly driven by the person themselves. This shows that crowds tend to believe in people’s self-predictions more than justified by the outcomes.
What this means in practice
- •For platform designers: Design prediction market interfaces to adjust for user optimism and improve forecast accuracy on personal goal outcomes.
- •For digital wellbeing teams: Develop tools that provide more realistic feedback to users about their goal achievement chances by accounting for optimism in self-predictions.
Authors
Zihan Chen, Lei Nico Zheng, Di Zhu
Abstract
People increasingly share personal goals online and invite others to forecast them. Research on the planning fallacy finds that observers predict a person's behavior less optimistically than the person does, and prediction markets aggregate such judgments, harnessing the wisdom of crowds. We study 6,150 prediction markets on Manifold in which 1,660 users asked about their own futures ("Will I ...?"), reconstruct every order and execution, and compare these self-markets with markets about external events. Self-markets resolved YES 4.4 percentage points less often than their final prices implied, whereas external markets were nearly calibrated (0.9 points); the difference was 2.2 points at the same price level and 1.9 points within creators who made both kinds of market. Absent when markets opened, the overstatement emerged within a day of trading, even where the person never traded, and peaked in the week before close. In a market's first day, observers moved external-market prices down toward the base rate, but moved self-market prices 3.6 points further toward YES, except in markets naming an outcome the person would not want, which were not overpriced. The correction came late and largely from the person, whose orders supplied 38% of the eventual movement toward the outcome in self-markets, against 9% in external markets. Because self-market prices mainly failed to separate successes from failures, a recalibration learned from earlier markets improved later forecasts by only 1.5%. Crowds believe in the futures people pose for themselves, and the information that would correct them lies with the person.