Coase-Sandor Working Paper Series in Law and Economics
Publication Date
2007
Publication Title
Law & Economics Working Papers
Abstract
For multiple reasons, deliberating groups often converge on falsehood rather than truth. Individual errors may be amplified rather than cured. Group members may fall victim to a bad cascade, either informational or reputational. Deliberators may emphasize shared information at the expense of uniquely held information. Finally, group polarization may lead even rational people to unjustified extremism. By contrast, prediction markets often produce accurate results, because they create strong incentives for revelation of privately held knowledge and succeed in aggregating widely dispersed information. The success of prediction markets offers a set of lessons for increasing the likelihood that groups can obtain the information that their members have.
Number
321
Recommended Citation
Cass R. Sunstein, "Deliberating Groups versus Prediction Markets (or Hayek's Challenge to Habermas)" (John M. Olin Program in Law and Economics Working Paper No. 321, 2007).
Additional Information
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