
Contents
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Agency Costs Agency Costs
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Conditional Prediction Markets: The Combinatorial Approach Conditional Prediction Markets: The Combinatorial Approach
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Improving the Hollywood Stock Exchange Improving the Hollywood Stock Exchange
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The Danger of Private Decision Maker Information The Danger of Private Decision Maker Information
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Markets for Insider Trading Markets for Insider Trading
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Self-Deciding Prediction Markets Self-Deciding Prediction Markets
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Replacing or Improving Shareholder Voting Replacing or Improving Shareholder Voting
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The Danger of Inefficient Markets The Danger of Inefficient Markets
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Selection, Dismissal, and Compensation of CEOS Selection, Dismissal, and Compensation of CEOS
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Cite
Abstract
This chapter explores ways in which public corporations might harness the benefits of prediction markets. A major challenge addressed by corporate law scholarship is that agency costs sometimes might lead managers to make decisions that advance their own interests rather than those of the shareholders. A prediction market can be seen as a mechanism that can help counter those agency costs, and it may be more effective than some alternative mechanisms, such as shareholder voting. This chapter explores a range of potential applications of prediction markets. It argues that a more powerful Hollywood Stock Exchange might not merely predict movie success but might also be used to determine which movies would be made. The chapter explains that prediction markets might promote the flow of information, both to managers and to actual and potential shareholders, and can serve as a weak form of insider trading.
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