IEM Cited in Market Research

In M.I.T. Professor Ely Dahan's marketing class, students do not trade securities but the traits of various goods and services, like automobiles and ski resorts. The exercise is part of an effort by Professor Dahan and colleagues at M.I.T. to prove that simulated trading could answer that most basic of all product development questions: What do consumers want? Dahan's research was inspired by the earlier successes of several Internet-based trading exchanges that have been called "decision markets" by Robin Hanson, an economics professor at George Mason University. The most renowned one, the IOWA ELECTRONIC MARKETS, has often outperformed pollsters in predicting election results. The market, operated by the Henry B. Tippie College of Business at the University of Iowa, permits investors to buy and sell shares in a candidate, based either on how much of the vote they expect the candidate to receive or simply on whether the candidate will win or lose. Under a special clearance from the Securities and Exchange Commission, the market accepts investments of up to $500, giving participants an incentive to invest seriously without running afoul of laws that ban gambling.