Conclusion (emphasis is mine): In the past few years, many companies have experimented with prediction markets. In this paper, we analyze the largest such exp

Conclusion (emphasis is mine): In the past few years, many companies have experimented with prediction markets. In this paper, we analyze the largest such experiment we are aware of. We find that prices in Google’s markets closely approximated event probabilities, but did contain some biases, especially early in our sample. The most interesting of these was an optimism bias, which was more pronounced for subjects under the control of Google employees, such as would a project be completed on time or would a particular office be opened. Optimism was more present in the trading of newly hired employees, and was significantly more pronounced on and immediately following days with Google stock price appreciation. Our optimism results are interesting given the role that optimism is often thought to play in motivation and the success of entrepreneurial firms. They raise the possibility of a “stock price‐optimism‐performance‐stock price” feedback that may be worthy of further investigation. We also examine how information and beliefs about prediction market topics move around an organization. We find a significant role for micro‐geography. The trading of physically proximate employees is correlated, and only becomes correlated after the employees begin to sit near each other, suggesting a causal relationship. Work and social connections play a detectable but significantly smaller role. An important caveat to our results is that they tell us about information flows about prediction market subjects, many of which are ancillary to employees’ main jobs. This may explain why physical proximity matters so much more than work relationships – if prediction market topics are lower‐priority subjects on which to exchange information, then information exchange may require the opportunities for low‐opportunity‐cost communication created by physical proximity. Of course, introspection suggests that genuinely creative ideas often arise from such low‐opportunity‐cost communication. Google’s frequent office moves and emphasis on product innovation may provide an ideal testing ground in which to better understand the creative process.