The use of digital trading platforms tremendously gained on interest during the Corona crisis. The possibility to trade stocks oneself via mobile applications lead to a significant rise in interest in financial markets. However, such trading places are not only used for stock trading. For many years, information markets have been a reliable tool for predicting events, especially in the field of politics, sports or movie business. Due to the high prediction accuracy and the high innovation pressure on companies, the question arises whether such markets are suitable for evaluating ideas in companies. For this purpose, 36 articles from journals and conference proceedings were consulted in the context of a systematic literature review. Thereby, nine topic areas could be found in which reasons against the implementation of information markets for this use case exist. The topics in descending order of the number of assigned articles are: Accuracy, Manipulation, Motivation, Complexity, Costs, Knowledge, Confidentiality, Organization and Legal. The research results were also analyzed according to the geographic profile, the publication numbers over time, as well as according to their keywords.
Table of Contents
1 Introduction
1.1 Problem definition
1.2 Objective and progress
2 Theoretical basics and state of research
2.1 Information markets
2.1.1 Prediction markets
2.1.2 Preference markets
2.1.3 Idea markets
2.2 Idea management
3 Methodology
4 Results
4.1 Temporal evaluation
4.2 Applied methodology
4.3 Countries of origin
4.4 Keyword evaluation
4.5 Referred subject areas
5 Discussion
6 Conclusion
6.1 Implications for academia and practitioners
6.2 Limitations and need for further research
Objective and Research Focus
This study investigates the limited dissemination of information markets in corporate environments for the purpose of idea evaluation, despite their documented potential and early success stories. The primary research question addresses why these markets have failed to achieve widespread adoption in the industry.
- Systematic analysis of corporate information market applications.
- Identification and categorization of key obstacles and limitations.
- Evaluation of geographic trends and research interest over time.
- Assessment of theoretical vs. practical application barriers.
Excerpt from the Book
Conscious manipulation
One of the most important factors influencing the probability of manipulation attempts by participants is the design of incentives (Kamp & Koen, 2012, p.59). It must be ensured that the rewards encourage participation and truthful trading, but are not too high, so that they can prompt manipulation (Buckley, 2016, p.92). This is particularly relevant, if participants are allowed to trade ideas, where they would directly or indirectly profit from (Antwi et al., 2017, p.116; Ho & Chen, 2007, p.23; Kamp & Koen, 2012, p.58; Stathel et al., 2010, p.212).
Studies from Cowgill and Zitzewitz (2015, p.1311), Spears et al. (2009, p.29) as well as Soukhoroukova et al. (2012, p.109) show that those trades made by insiders are more likely to be optimistic and founders tend to buy their own ideas above the weighted average price. They also sell in lower frequency and volume. This “Wishful thinking” effect can have negative effects on the prediction accuracy according to LaComb et al. (2007, p.252), Ottaviani (2009, p.42) and Spears et al. (2009, p.29). In order to limit this manipulation, several different strategies, for instance not allowing to purchase own shares (Lauto & Valentin, 2016, p.609), prohibition of short-selling (Lauto & Valentin, 2016, p.609) or the introduction of a lottery incentive (Spears et al., 2009, p.21) were already tested. Since it will still be possible to promote your idea to friends, close colleagues etc. (Spears et al., 2009, p.34), those regulations cannot completely prevent manipulation (Ottaviani, 2009, p.43). Additionally, with more and more complex regulations, such as position limits for example, the information market can turn into an auction or voting (Wolfers & Zitzewitz, 2006, p.21).
Summary of Chapters
1 Introduction: This chapter highlights the rise of online trading platforms and introduces information markets as a tool for corporate decision-making and forecasting, while defining the problem of their limited adoption for idea evaluation.
2 Theoretical basics and state of research: This section defines key terminology including prediction, preference, and idea markets, and explores the underlying principles of market efficiency and the wisdom of the crowd.
3 Methodology: The author details the systematic literature review process, covering the period 1988–2020, database selection, and the criteria used to filter 36 relevant articles.
4 Results: This chapter provides a quantitative and qualitative breakdown of the literature, evaluating temporal trends, geographic profiles, and the nine identified subject areas of concern.
5 Discussion: The author critically examines the findings, linking market barriers such as cost, complexity, and organizational culture to the current lack of widespread practical adoption.
6 Conclusion: The study concludes by synthesizing the identified obstacles and providing recommendations for academia and practitioners to improve future market implementations.
Keywords
Information markets, Idea management, Prediction markets, Preference markets, Idea evaluation, Systematic literature review, Corporate innovation, Market design, Decision-making, Accuracy, Manipulation, Motivation, Complexity, Confidentiality, Legal framework.
Frequently Asked Questions
What is the core focus of this research?
The research examines the systematic literature on information markets to understand why, despite proven predictive capabilities in other fields, they have not been widely adopted for corporate idea evaluation.
What are the central thematic areas identified?
The study identifies nine critical areas: Accuracy, Manipulation, Motivation, Complexity, Costs, Knowledge, Confidentiality, Organization, and Legal issues.
What is the primary objective of this work?
The goal is to determine the underlying reasons for the slow industrial adaptation of information markets for assessing ideas and innovations.
Which methodology does the author employ?
The author conducts a systematic literature review following the six-step process, analyzing 36 highly relevant articles published between 1988 and 2020.
What is covered in the main body of the work?
The work provides theoretical foundations, a detailed methodology, an empirical analysis of literature trends (temporal, geographic, and topical), and a discussion on the inhibitors of market adoption.
Which keywords characterize this paper?
Key terms include information markets, idea evaluation, market design, corporate innovation, and the specific identified barriers like manipulation and organizational impact.
How does insider knowledge affect market performance?
The study notes that insider knowledge can be a double-edged sword; while it potentially increases information quality, it also leads to optimistic biases and manipulation attempts like "wishful thinking".
Why do traditional prediction market incentives fail in idea management?
Unlike traditional markets with verifiable real-world outcomes, idea evaluation requires alternative comparative mechanisms (e.g., expert committees), which complicates the incentive structure and risks introducing a "beauty contest" effect.
- Arbeit zitieren
- Patrick Bründl (Autor:in), 2021, The Use of Information Markets in Corporate Idea Management, München, GRIN Verlag, https://www.grin.com/document/1164755
