Information markets are markets specifically designed to aggregate information distributed among autonomous agents by enabling trade in securities for which the ultimate payoff value depends on future events. In recent years, many information markets have been deployed on the Internet; the deployed markets include markets to aggregate information and opinions on political events, scientific and technological breakthroughs, movie box office receipts, and the public interest in new products and technologies. Research will be conducted into basic strategic properties of information markets, including the design of new market structures with attractive incentive properties, as well as the computational capacity of these markets to aggregate information. The results of this project will be of direct importance to the growing industry that is designing or deploying information markets.
Research will be conducted in three areas: (1) Developing and analyzing a strategic model of novel information market forms, and using it to characterize markets in which traders cannot profitably mislead other traders. (2) Analyzing the potential loss of informativeness when traders have external preferences over market outcomes, and developing composition principles that enable related markets to operate while controlling this information loss. (3) Characterizing the aggregates that can be computed, speed of computation, and communicative efficiency of information markets. This research will tackle fundamental problems on strategic and computational aspects of information markets, as well as strengthen the connection between information markets and classic information theory. Rigorous results in the studied areas will considerably advance our understanding of information markets.
