A multi-agent system for analyzing the effect of information on prediction markets

Prediction markets have been shown to be a useful tool for forecasting the outcome of future events by aggregating public opinion about the event’s outcome. In this paper, we investigate an important aspect of prediction markets the effect of different information related parameters on the behavior of the traders in the market. We have developed a multi-agent based system that incorporates different informationrelated aspects including the arrival rate of information, the reliability of information, the penetration or accessibility of information among the different trades and the perception or impact of information by the traders. We have also performed extensive simulations of our agent-based prediction market for analyzing the effect of information related parameters on the traders’ behaviors expressed through their trading prices. Our results provide a better understanding of the effect of information on the operation of prediction markets and on the strategies used by the prediction market’s traders. (150 words)