Chapter 11. Prediction Markets for Economic Forecasting Prediction markets – markets used to forecast future events – have been used to accurately forecast the outcome of political contests sporting events and occasionally economic outcomes. This chapter summarizes the latest research on prediction markets in order to further their utilization by economic forecasters. We show that prediction markets have a number of attractive features: they quickly incorporate new information are largely efficient and are impervious to manipulation. Moreover markets generally exhibit lower statistical errors than professional forecasters and polls. Finally we show how markets can be used to both uncover the economic model behind forecasts as well as test existing economic models.