Follow the Money, not the Majority: A mechanism Predicting Unresolvable Events

Aurélien Baillon, Benjamin Tereick, Tong V. Wang   Published : August 2025   JEL Code: D82, C90   URL to this Article: https://doi.org/10.1007/s11166-025-09463-9

Abstract

Mechanisms such as scoring rules and prediction markets can be used to incentivize truthful signal reporting and to aggregate signals. However, they are fundamentally limited by the fact that uncertainty should resolve. In this paper, we develop a mechanism, based on Bayesian markets, that incentivizes accuracy and aggregates information for unresolvable events. Participants decide whether to endorse a statement and trade an asset whose value depends on the endorsement rate. The respective payoffs of buyers and sellers indicate whose endorsement to trust. We demonstrate theoretically and illustrate empirically that "following the money" outperforms selecting the majority endorsement.

Keywords

Signal elicitation; Wisdom of crowds; Expert aggregation; Truth-telling incentives