about the simExchange
The simExchange is the virtual stock market for video games. No real money is involved in this stock market, rather the purpose of the project is to forecast the video game industry. Participants buy and sell stocks in video game proporties using virtual currency called DKP to predict how well games will sell or how they will be reviewed. This concept is commonly known as a "prediction market."
How does this work?
The stock's current price is the current forecast for a product. For example, if the PS3's stock is at 5,000 DKP, this corresponds to a forecast of 50 million units sold globally over the PS3's lifetime. If you think the PS3 will really sell 60 million units, you would be willing to buy the stock up to 6,000 DKP. If you think the PS3 will really sell 40 million units, you would be willing to short sell the stock down to 4,000 DKP. Through this trading, the simExchange generates forecasts for video game units sales and video game reviews.
How accurate is this?
Prediction markets are the fastest and most accurate means to forecast the future. Why? If a forecast is perceived to be incorrect to a participant, they will buy or sell the forecast in the direction they believe to be correct. Participants only express opinions if they feel strongly about their information, as opposed to a survey in which participants will answer every question regardless of their confidence. As soon as participants hear about news that will affect a forecast, they will quickly buy and sell stocks to reflect this new information.
Over time, a prediction market gets more accurate. Accurate predictors are rewarded with more DKP to make more predictions, while inaccurate predictors lose DKP and cannot make as many predictions.
Where's the proof?
The Iowa Electronic Market applies prediction market technology to predicting the US Presidency. Compared with 596 polls, the prediction market was more accurate 75% of the time.
HP applied prediction market technology to predict its printer sales. Over 3 years, the prediction market outperformed the company's own expert analysts 75% of the time.
