evaluation. This paper describes the solution of these
problems.
2 PREDICTION MARKET
Prediction markets are speculative markets created
for the purpose of making predictions. Assets are
created whose final cash value is linked to a
particular event (e.g., the winner of the Czech
Parliament election will be the Civic Democratic
Party) or a parameter (e.g., the close value of PX
index on Friday 19/1/2012). Other names for these
markets are predictive markets, information markets,
decision markets, idea futures, event derivatives, or
virtual markets. The current market prices can then
be interpreted as predictions of the probability of the
event or the expected value of a parameter. People
who buy low and sell high are rewarded for
improving the market prediction, while those who
buy high and sell low are punished for degrading the
market prediction (PM, 2011).
Many prediction markets are open to the public.
Betfair is the world's biggest prediction exchange,
with around $28 billion traded in 2007. Intrade is a
for-profit company with a large variety of contracts
not including sports. The Iowa Electronic Markets
(I.E.M) is an academic market examining elections
where positions are limited to $500. This market was
opened in 1988 (IEM, 2011). The I.E.M. routinely
outperforms the major national polls. In the last four
presidential elections the I.E.M.’s election-eve
predictions were off by an average of just 1.37 per
cent.
Other prediction market, the Hollywood Stock
Exchange, which allows people to speculate on the
box-office returns, opening-weekend performance,
and the Oscars, has also been prescient. Traders’
predictions of the opening-weekend returns are more
accurate than the movie industry’s forecasts, and the
Exchange has done a good job of foreseeing
nominations as well. Last year, its traders correctly
predicted thirty-five of the forty Oscar nominees in
the top eight categories. The participants of these
markets also “decided” the results of the Iraq war
and the Sadam Hussain’s destiny. (Surowiecki,
2003)
Why do decision markets work so well? They are
extremely efficient at aggregating information and
tapping into the collective wisdom of a group of
traders, and groups are almost always smarter than
the smartest people in them. As in financial markets,
the incentive to get the better of others (whether the
reward is profit or mere satisfaction) causes traders
to seek out good information. The absence of
hierarchy - markets don’t have vice-presidents -
insures that no single person has too much influence
and that diverse viewpoints don’t get shut out.
(Surowiecki, 2003)
2.1 FreeMarket – Prediction Market
on University of West Bohemia
An electronic prediction market under the name of
FreeMarket (FM) has been running at the Faculty of
Economics, UWB in Pilsen, since November 2007
(FM, 2012). To this time 1600 users are registered
and around 450 of them, participants of financial
courses, are registered in each of the fall semesters
2009/2010, 2010/2011, 2011/2012. The shares are
divided into 4 areas:
• Politics
• Sport
• Entertainment
• Economics
The portfolio of each of the participants was
composed by an endowment of 5,000 credits (money
units, points) when registering or 10,000 credits
when he/she passes the final exam to become an FM
broker and receives an FM broker concession
number. The applicant can pass the exam together
with practical training of trading in an e-learning
course that is a supplement to the FM system.
The login to FM runs under the common
university single sign-on system. This system
ensures the creation of just one trading account for
each student and this way it prevents students from
creating the “black” trading. In the past this system
was not used and the control mechanism detected
several students that had created “black” accounts to
receive more starting points from each of those
accounts and then they transferred the points to their
official account with the help of illegal trade.
3 NETWORKING BETWEEN FM
AND LMS MOODLE
From fall semester 2009/2010 the FM system was
interconnected with the LMS Moodle. The reasons
for this connection are to increase student motivation
and to prevent some students from “black” trade
realization. The connection to LMS belongs to the
incentives of FreeMarket, proposed and
implemented by the author of this paper.
In the first case thanks to this connection the
students could transfer their earned points to
engineering courses credits in announced rate
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