Preference Markets: Organizing Securities Markets for Opinion Surveys with Infinite Scalability

Preference markets address the need for scalable, fast and engaging market research. For faster new product development decisions, we implement a flexible prioritization methodology for product features and concepts, one that scales up in the number of testable alternatives, limited only by the number of participants. Preferences are measured by trading stocks whose prices are based upon share of choice of new products and features. We develop a conceptual model of scalable preference markets, and test it experimentally. Our conceptual model posits that individuals: (a) develop expectations of others based on self preferences, (b) use those expectations when buying and selling stocks, (c) have their opinions differentially weighted by the market pricing mechanism, resulting in a consensus of opinions, (d) learn from trading, and further converge towards consensus. Four studies confirm (a) (d). Beyond accuracy, advantages of the methodology include speed (less than one hour per trading experiment), scalability (question capacity grows linearly in the number of traders), flexibility (questions in mixed formats can be answered simultaneously), and respondent enthusiasm for the method.