The Hollywood Stock Exchange allows users to bet on the success of movies 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 returned to them if the film were not made. Which statement is NOT true?
A) Studios could use such information to make films that are more popular and profitable.
B) Studios could make better decisions about budgeting and marketing.
C) Studios would know in advance whether the prediction market was accurate.
D) Studios have an incentive to set up such a market.

Question

Quizplus · Accepted Answer

Studios would not necessarily know in advance if the prediction market was accurate because there are many unpredictable factors that could influence a film's success. The market would provide information on the potential popularity of a film, but success would not be guaranteed.

The Hollywood Stock Exchange Allows Users to Bet on the Success