Eliminating Public Knowledge Biases in Small Group Predictions

TL;DR

This paper introduces a new two-stage method combining an information market and a coordination game to identify and correct for public knowledge biases in small group predictions, improving accuracy over traditional markets.

Contribution

The paper proposes a novel nonlinear aggregation mechanism that effectively eliminates public knowledge biases in small group decision-making.

Findings

Outperforms traditional market-based aggregation methods.

Accurately estimates the probability of uncertain events.

Reduces bias from public information in group predictions.

Abstract

We present a novel methodology for identifying public knowledge and eliminating the biases it creates when aggregating information in small group settings. A two stage mechanism consisting of an information market and a coordination game is used to reveal and adjust for individuals' public information. A nonlinear aggregation of their decisions then allows for the calculation of the probability of the future outcome of an uncertain event, which can then be compared to both the objective probability of its occurrence and the performance of the market as a whole. Experiments show that this nonlinear aggregation mechanism outperforms both the imperfect market and the best of the participants. .