Iowa Electronic Health Market Opens Swine Flu Prediction Markets
The Iowa Electronic health Market (IEhM) has opened several new markets to track and forecast trends in the current H1N1 swine flu outbreak.
“Information generated by this research project will not replace existing surveillance systems, but we think our prediction markets may provide a useful supplement,” says Philip Polgreen, MD, an assistant professor of internal medicine at the University of Iowa’s Carver College of Medicine and codirector of the IEhM.
The IEhM is a spin-off from the Iowa Electronic Market, which pioneered the first prediction markets in 1988. Since that time, prediction markets have proven to be more accurate than traditional tools in predicting future events, ranging from political election results to movie box office receipts; they are also used by the private sector to forecast outcomes such as which drugs have the best chance of advancing through clinical trials or which printers will sell. The IEhM is the first research group to use prediction markets for public health issues.
“To date, the IEhM has run markets to predict seasonal influenza activity at a state level and also the number of avian influenza cases. Both of these markets have provided accurate and timely infectious disease forecasts,” says Forrest Nelson, a professor of economics at the University of Iowa’s Tippie College of Business and the IEhM’s director.
The H1N1 influenza (swine flu) market can be found online with the IEhM’s other health markets at http://iehm.uiowa.edu. Initial offerings in the market serve to aggregate information on the following five separate questions:
• How long will the current outbreak last in the United States?
• How many U.S. states will be affected?
• How many cases will be confirmed in the United States?
• What will the mortality rate be among confirmed cases?
• How many other countries will be affected?
The IEhM is currently recruiting members of the clinical, public health, and animal health communities to participate. Applications from people in other fields will also be considered.
The H1N1 market does not use real money. Traders receive 100 “H1N1 dollars” when they sign up for their account, and this token currency is used for buying and selling contracts.
The market works as a prediction market by determining the probability of event outcomes. One contract is associated with each possible outcome of an event. After the actual outcome is observed, the associated contract will be worth H1N1$1, while the others will be worth H1N1$0. Prior to the event, traders who think a particular outcome will occur bid up the price of the associated contract; those who think it unlikely to occur bid it down. The price that emerges can be interpreted as the consensus view of the probability that the outcome will occur.
Source: University of Iowa Health Sciences