Prediction Markets: A New Tool for Strategic Decision Making

by Adam Borison, Gregory Hamm


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Abstract

Uncertainty is at the center of many of the most important strategic decisions made by private businesses and public agencies. Many of these decisions are driven by judgmental rather than data-rich uncertainties - the rate of climate change, the impact of globalization, the prospects for regional conflicts, the extent of environmental legislation, or the advancement of technology. To help improve the way these important judgment-driven decisions are made, an emerging tool - prediction markets - can improve this practice and thereby improve the quality of strategic decision making. While it is important not to be carried away by the latest fad, prediction markets will play a major role in improving the quality of strategic decisions in the future.

California Management Review

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