In my homework assignment I took a closer look on prediction markets based on real money and prediction markets based on real money. In the reading of this week I find that there was no difference in the accuracy of prediction with the use of real money or play money (Servan-Schreiber et al.,2004). However I also read an article that stated that play money markets can have higher accuracy in prediction certain outcomes. This is because of the fact that play money traders can (mostly) not refund their account. So the people who predicted bad in the past will be ‘eliminated’ and only the best traders will survive, but real money trades can refund themselves anytime. (Diemer, 2010)
I also compared two prediction market platforms. The first one is the Hollywood Stock Exchange which is really big and is based on play money. The other example I found was Ipredict. This prediction market was based on real money and was also a bit smaller. When comparing the two we see that size does matter in this case. As HSX has al lot of traders which make them more accurate.