We study experimental markets where privately informed traders exchange simple assets, and where uninformed third parties are asked to forecast the values of these assets, guided only by market prices. Although prices only partially aggregate information, they significantly improve the forecasts...

Prediction markets are low volume speculative markets whose prices offer informative forecasts on particular policy topics. Observers worry that traders may attempt to mislead decision makers by manipulating prices. We adapt a Kyle-style market microstructure model to this case, adding a...