Ely Dahan

Ely Dahan, a professor at UCLA, appears in the book as a researcher experimenting with decision markets. His classroom market asked students to trade securities representing consumer goods and services; its forecasts closely resembled those of conventional market research, but the classroom research was much cheaper. The example shows how a designed mechanism can gather dispersed judgments and turn them into a collective forecast.

Classroom Decision Market

Dahan’s experiment gave students securities tied to a range of products and services, including SUVs, ski resorts, and personal digital assistants. In a real-world version, a security’s value might depend on the first-year sales of a particular SUV. The arrangement made students’ market activity a means of forecasting consumer demand rather than simply discussing it.

The resulting predictions were strikingly similar to conventional market-research forecasts. The comparison mattered not only because the market produced plausible estimates, but because it did so at substantially lower cost. The book presents the classroom exercise as evidence that market mechanisms could offer organizations a relatively inexpensive alternative or complement to established forecasting methods.

Markets as Collective Judgment

Dahan’s experiment belongs to the book’s wider account of decision markets: systems that use prices to combine many participants’ judgments into a single forecast. Their promise depends on conditions that also characterize wise crowds: diversity of opinion, independent judgment, decentralization that allows people to draw on specialized or local knowledge, and an aggregation mechanism capable of combining those inputs. Where participants bring relevant information, their errors can offset one another, leaving a collective estimate that contains more information than any one person’s guess.

The experiment is presented as a practical illustration, not as proof that every market forecast will be accurate. The book cautions that markets may fail when too few people participate or when the question is inherently unpredictable. Dahan’s example instead supports a conditional claim: when a problem is suitable and a market can attract useful judgments, trading can make dispersed information collectively legible and may do so more cheaply than conventional research.