In addition, they planned to let traders predict combinations of these, such has how moving U.S.
troops out of Saudi Arabia would affect political stability there, how that would affect stability in
neighboring nations, and how all that might change oil prices. Similar trades could have predicted the
local and global consequences of invading Iraq, had the markets been ready then.
For many years before PAM, Net Exchange had specialized in combinatorial markets, where
buyers and sellers could exchange complex packages of items. So from the start, the plan was to see how
far they could go in developing combinatorial prediction markets. In phase I, Net Exchange put together a
combinatorial market similar to their previous combinatorial markets, and at the end of phase I they ran a
complex simulation in which a dozen students traded over a few days for real money. Unfortunately, only
about a dozen trades occurred, a serious failure.
In the interim phase, the Net Exchange team prepared for and ran lab experiments comparing two
new combinatorial trading mechanisms with each other and with a traditional mechanism. These
experiments had three traders set seven independent prices in three minutes, and then had six traders set
255 independent prices in three minutes. They found that a combinatorial market maker was the most
accurate.
Phase II was mostly being spent implementing a scalable production version of this market
maker. Because this mechanism requires a net subsidy to traders, they had budgeted $50,000 for this
subsidy, and individual bets were to be limited to a few tens of dollars.
The PAM team was concerned that they might not attract enough traders in the final phase to
achieve a meaningful test. Team members had considered running markets within government agencies,
but found strong legal barriers to conditional transfers of money between agencies. In the absence of a
single agency strongly interested in collaborating with them, they choose to create public markets.
On May 20, 2003, DARPA reported to Congress on the IAO, and described FutureMAP in terms
of predicting a bioweapons attack against Israel. In June 2003, the PAM team began to tell people about
their Web page and to give talks to drum up interest. Charles Polk created the PAM Web site, wherein as
a backdrop to bold text, there were faint background sample screens. In a small (less than 2 percent)
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Convention