ABSTRACT
Social media and online social networks have not only revolutionized how we interact with others but also dramatically impacted the wisdom of crowds. Due to the explosive growth of social media, individuals’ estimates are affected by each other in today’s social networking world. Social interactions and information exchange have significant implications for the wisdom of crowds. In real-world business practice, a prediction market is one of the most popular information aggregation mechanisms to tap into the wisdom of crowds. In a social media–based prediction market, this chapter investigates how social image can be used as a nonmonetary incentive to improve individual prediction accuracy. Furthermore, we examine the dual roles of social interaction in prediction markets: (i) alleviating the problem of overweighting public information and (ii) causing a free-rider problem in information acquisition. These results have important and practical implications for the prediction market designers to enhance prediction market performance using social media.
