The article ‘Bayesian markets to elicit private information’, by fellow Aurélien Baillon (Erasmus University Rotterdam) was published in the Proceedings of the National Academy of Science (vol. 114 (30), July 25, 2017, Pages 7958-7962). In this article, which is part of a project financed by an ERC Starting Grant, Baillon proposes a new type of markets to reveal. Read an interview with him below.
It is long known that making people bet on future events reveal what they think about these events. Predictions markets have been exploiting this idea. Baillon proposes a new kind of markets, “Bayesian markets”, to reveal unverifiable personal information. Instead of betting on future events, people bet on what the others feel, think or did, and this is used to reveal what they themselves feel, think or did.
Interview with A. Baillon
How does it work?
AB: “Since the 1970s, it is known in psychology that what we think of others is influenced by our own characteristics. For instance, sad people expect more sad people than those who are not sad expect. Or, as one of my students found among his peers, those who cheat in exams expect more cheaters than expected by those who don’t cheat. We don’t expect everyone to be like us, we are simply influenced by our own behaviour. What I propose is to use this intuition and make people bet on others. The bet rewards people for telling the truth about their feelings, their thoughts, or their past actions.”
What can it be used for?
AB: “I see two main domains of application. The first one is for social scientists, survey companies, but also companies collecting expert opinions. The method I propose can reward respondents (citizens or experts) if they make the effort to give an honest and carefully considered answer. The second application is in the domain of online evaluation, all these websites or apps asking us to evaluate hotels, restaurants, movies… After reporting that you liked a movie, you could be asked: ‘do you bet that more than 70% of the spectators will also like it?’ If you win your bet, you could earn ‘points’, which could be converted into an ‘expert score’, or vouchers, or donations to a charity… Such a mechanism could make online reviews more trustworthy.”
Opinion of Prof. Drazen Prelec, from MIT
DP: “Like many great ideas, Baillon’s Bayesian market is simple, but only in retrospect. He shows how one can create markets for betting for or against propositions, even if the actual truth of these propositions cannot ever be publicly verified. This could be extremely useful in combining opinions from experts, as well as ordinary citizens. I hope that we will see this invention implemented on our iPhones in the not so distant future.”
About Aurélien Baillon
Baillon (1980) joined Erasmus School of Economics in 2007, after obtaining a research master at the University of Toulouse and a Ph.D. at Arts et Métiers ParisTech. In the past years he was awarded a Veni and a Vidi grants from the Netherlands Organization for Scientific Research (N.W.O.) and a Starting Grant from the European Research Council. His research has been published in leading journals, including the American Economic Review.
Learn more? Read full article here.Watch video here: