This paper studies the effects of information exchange and social networks on the performance of prediction markets with endogenous information acquisition. We provide a game-theoretic framework to resolve the question: Can social networks and information exchange promote the forecast efficiency...

Information aggregation mechanisms are designed explicitly for collecting and aggregating dispersed information. An excellent example of the use of this “wisdom of crowds” is a prediction market. The purpose of our social network-embedded prediction market is to suggest that carefully...