Designing prediction markets for international negotiations: Lessons learnt from the Climate Summit in Copenhagen |
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Institution: | 1. Centre for Energy and Environmental Markets, School of Economics, University of New South Wales, Sydney 2052, NSW, Australia;2. Zurich University of Applied Sciences, School of Management and Law, Winterthur, Switzerland;1. Department of Environmental Sciences, University of California, Riverside, 900 University Ave, Riverside, CA 92521, USA;2. School of Public Policy, University of California, Riverside, 900 University Ave, Riverside, CA 92521, USA;1. Université Paris-Dauphine, PSL Research University, CNRS, UMR [7243], Lamsade, 75016 Paris, France;2. Murat Sertel Center for Advanced Economic Studies, Istanbul Bilgi University, Turkey |
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Abstract: | This paper presents results from a field experiment of running a prediction market for international climate negotiations. We draw upon our experience of running the Copenhagen Prediction Market during the Copenhagen Climate Summit in December 2009. The Copenhagen Prediction Market consisted of 17 different markets, where participants could trade in shares predicting, amongst others, reduction targets for various countries, the long-term stabilisation goal or the level of funding from developed countries to developing nations for mitigation and adaptation actions. We show that this novel application of prediction markets to climate negotiations is distinct from more traditional applications and, in many ways, more challenging. We discuss our experiences in designing and setting up the market and interpreting its results. In particular, it is crucial to be able to define the outcome of a climate conference in the face of often ambiguous final communications in order to make the prediction market robust and to find benchmarks to compare prediction market performance against. |
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Keywords: | Prediction markets Information markets United Nations Framwork Convention on Climate Change Copenhagen Climate Summit |
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