Sunday, October 5, 2008

Grass Roots Data vs. Formal Data

With turmoil in US financial markets, a question is what effect with this chaos can be expected to have across the economy.

Inkling blog reports on a recent seminar for market researchers where the following question came up:
[I]f I'm a market researcher at a luxury hotel or fancy car company, should I be quaking in my boots? And vice versa, if I'm a market researcher at a budget hotel company, should I be ramping up the marketing budget?
Using traditional methods, an empirical answer to that question is weeks away in the next report on the latest round of surveys. However:
[W]earing my prediction market hat I had a simple thought: why not augment this traditional methodology with a constant stream of questions posed in a prediction market? Grass roots data vs. formal data.
The solution:
Exploring this thought further, let's say we did work for a budget hotel company. We could first identify what the levers are that drive our business. Business travel patterns. Gas prices. Stock market performance. Competitive activity. Then we could recruit people who have insight in to these factors and ask them to participate in an ongoing prediction marketplace. These aren't necessarily just hotel goers, they could be economists, wall street traders, bankers, and professionals from the energy industry.
Prediction markets as a compliment to traditional survey-based empirical research. Not as radical as it seems.

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