Forecasting uncertain events with small groups

  • Authors:

  • Kay-Yut Chen;Leslie R. Fine;Bernardo A. Huberman

  • Affiliations:

  • HP Laboratories, Palo Alto, CA;HP Laboratories, Palo Alto, CA;HP Laboratories, Palo Alto, CA

  • Venue:
  • Proceedings of the 3rd ACM conference on Electronic Commerce
  • Year:
  • 2001

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Abstract

We present a novel methodology for predicting future outcomes that uses small numbers of individuals participating in an imperfect information market. By determining their risk attitudes and performing a nonlinear aggregation of their predictions, we are able to assess the probability of the future outcome of an uncertain event and compare it to both the objective probability of its occurrence and the performance of the market as a whole. Experiments show that this nonlinear aggregation mechanism vastly outperforms both the imperfect market and the best of the participants.