caa a22 4500 605514917 CHVBK 20210128100706.0 cr unu---uuuuu 210128e20150301xx s 000 0 eng 10.1007/s10458-014-9249-1 doi (NATIONALLICENCE)springer-10.1007/s10458-014-9249-1 Market manipulation with outside incentives [Elektronische Daten] [Yiling Chen, Xi Gao, Rick Goldstein, Ian Kash] Much evidence has shown that prediction markets can effectively aggregate dispersed information about uncertain future events and produce remarkably accurate forecasts. However, if the market prediction will be used for decision making, a strategic participant with a vested interest in the decision outcome may manipulate the market prediction to influence the resulting decision. The presence of such incentives outside of the market would seem to damage the market's ability to aggregate information because of the potential distrust among market participants. While this is true under some conditions, we show that, if the existence of such incentives is certain and common knowledge, in many cases, there exist separating equilibria where each participant changes the market probability to different values given different private signals and information is fully aggregated in the market. At each separating equilibrium, the participant with outside incentives makes a costly move to gain trust from other participants. While there also exist pooling equilibria where a participant changes the market probability to the same value given different private signals and information loss occurs, we give evidence suggesting that two separating equilibria are more natural and desirable than many other equilibria of this game by considering domination-based belief refinement, social welfare, and the expected payoff of either participant in the game. When the existence of outside incentives is uncertain, however, trust cannot be established between players if the outside incentive is sufficiently large and we lose the separability at equilibria. The Author(s), 2014 Market manipulation nationallicence Equilibrium analysis nationallicence Prediction market nationallicence Information aggregation nationallicence Chen Yiling School of Engineering and Applied Sciences, Harvard University, Cambridge, MA, USA aut Gao Xi School of Engineering and Applied Sciences, Harvard University, Cambridge, MA, USA aut Goldstein Rick Analytics Operations Engineering, Boston, MA, USA aut Kash Ian Microsoft Research, Cambridge, UK aut Autonomous Agents and Multi-Agent Systems Springer US; http://www.springer-ny.com 29/2(2015-03-01), 230-265 1387-2532 29:2<230 2015 29 10458 https://doi.org/10.1007/s10458-014-9249-1 text/html Onlinezugriff via DOI BK010053 XK010053 XK010000 Metadata rights reserved Springer special CC-BY-NC licence nationallicence 1 research-article jats NATIONALLICENCE NATIONALLICENCE NL-springer NATIONALLICENCE 856 40 https://doi.org/10.1007/s10458-014-9249-1 text/html Onlinezugriff via DOI NATIONALLICENCE 700 1- Chen Yiling School of Engineering and Applied Sciences, Harvard University, Cambridge, MA, USA aut NATIONALLICENCE 700 1- Gao Xi School of Engineering and Applied Sciences, Harvard University, Cambridge, MA, USA aut NATIONALLICENCE 700 1- Goldstein Rick Analytics Operations Engineering, Boston, MA, USA aut NATIONALLICENCE 700 1- Kash Ian Microsoft Research, Cambridge, UK aut NATIONALLICENCE 773 0- Autonomous Agents and Multi-Agent Systems Springer US; http://www.springer-ny.com 29/2(2015-03-01), 230-265 1387-2532 29:2<230 2015 29 10458