The hollywood stock exchange allows users to bet on the success of moveis alread
ID: 1224609 • Letter: T
Question
The hollywood stock exchange allows users to bet on the success of moveis already produced. Imagine that a new exchange develops that allows users to bet on the success of movies not yet produced. A contract would pay some fraction of the film's future gross earnings if the film actually gets produced, and users would have their money back if the film were not made.
Which statement is NOT true?
A. Studios could make better decisions about budgeting and marketing
B. Studios have an incentive to set up such a market
C. Studios would know in advance whether the prediction market was accurate
D. Studios could use such information to make films that are more popular and profitable.
Explanation / Answer
Option (C) is incorrect.
A prediction is a forecast made on the basis of certain (relevant) assumptions and premises, which is close to accuracy but can never be 100% accurate. Also, accuracy of a prediction cannot be known in advance (ex-ante).
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