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BayesianMarkets SIGNED

Bayesian markets for unverifiable truths

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EC-Contrib. €

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Project "BayesianMarkets" data sheet

The following table provides information about the project.

Coordinator
ERASMUS UNIVERSITEIT ROTTERDAM 

Organization address
address: BURGEMEESTER OUDLAAN 50
city: ROTTERDAM
postcode: 3062 PA
website: www.eur.nl

contact info
title: n.a.
name: n.a.
surname: n.a.
function: n.a.
email: n.a.
telephone: n.a.
fax: n.a.

 Coordinator Country Netherlands [NL]
 Total cost 1˙500˙000 €
 EC max contribution 1˙500˙000 € (100%)
 Programme 1. H2020-EU.1.1. (EXCELLENT SCIENCE - European Research Council (ERC))
 Code Call ERC-2014-STG
 Funding Scheme ERC-STG
 Starting year 2016
 Duration (year-month-day) from 2016-01-01   to  2020-12-31

 Partnership

Take a look of project's partnership.

# participants  country  role  EC contrib. [€] 
1    ERASMUS UNIVERSITEIT ROTTERDAM NL (ROTTERDAM) coordinator 1˙500˙000.00

Map

 Project objective

Subjective data play an increasing role in modern economics. For instance, new welfare measurements are based on people’s subjective assessments of their happiness or their life satisfaction. A problem of such measurements is that people have no incentives to tell the truth. To solve this problem and make those measurements incentive compatible, I will introduce a new market institution, called Bayesian markets. Imagine we ask people whether they are happy with their life. On Bayesian markets, they will trade an asset whose value is the proportion of people answering Yes. Only those answering Yes will have the right to buy the asset and those answering No the right to sell it. Bayesian updating implies that “Yes” agents predict a higher value of the asset than “No” agents do and, consequently, “Yes” agents want to buy it while “No” agents want to sell it. I will show that truth-telling is then the optimal strategy. Bayesian markets reward truth-telling the same way as prediction markets (betting markets) reward people for reporting their true subjective probabilities about observable events. Yet, unlike prediction markets, they do not require events to be objectively observable. Bayesian markets apply to any type of unverifiable truths, from one’s own happiness to beliefs about events that will never be observed. The present research program will first establish the theoretical foundations of Bayesian markets. It will then develop the proper methodology to implement them. Finally, it will disseminate the use of Bayesian markets via applications. The first application will demonstrate how degrees of expertise can be measured and will apply it to risks related to climate change and nuclear power plants. It will contribute to the political debate by shedding new light on what true experts think about these risks. The second application will provide the first incentivized measures of life satisfaction and happiness.

 Publications

year authors and title journal last update
List of publications.
2017 Aurélien Baillon
Bayesian markets to elicit private information
published pages: 7958-7962, ISSN: 0027-8424, DOI: 10.1073/pnas.1703486114
Proceedings of the National Academy of Sciences 114/30 2019-05-29
2018 Iain Hamlin, Gordon R.T. Wright, Sophie Van der Zee, Stuart Wilson
The dimensions of deception detection: Self-reported deception cue use is underpinned by two broad factors
published pages: 307-314, ISSN: 0888-4080, DOI: 10.1002/acp.3402
Applied Cognitive Psychology 32/3 2019-05-07

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