The UBC is able to do a non-profit elections prediction market, and it generally does better than the average of the top 5 pollsters.
The popular vote market is you pay $1 for 1 share of CON, LIB, NDP, Green, Other, and you can trade shares like a stockmarket.
The ending payout is $1 * % of popular vote that group gets.
There are other markets such as a seat market, and a majority market.
The majority market pays 50⁄50 if no majority is reached, and 100⁄0 otherwise, which makes it pretty awkward in some respects. Generally predicting a minority government the most profitable action is to try and trade for shares of the loser. This is probably the main reason its restricted to the two parties with a chance of winning one if it were the same 5 way system, trading LIB and CON for GREEN, OTHER and NDP to exploit a minority government would probably bias the results. In this case in a minority the payout would be 20/20/20/20/20, but many traders would be willing to practically throw away shares of GREEN, OTHER and NDP because they “know” those parties have a 0% chance of winning a majority. This leads to artificial devaluation and bad prediction information.
By trading 1 share of CON for 5 GREEN and 5 OTHER, you just made 10 times the money in a minority government, and that’s the payoff you’re looking for instead of saying that you think the combined chances of Green and Other winning a majority is 1/6th that of the conservatives winning.
Of course they still have this problem with Liberals and Conservatives where trading out of a party at a favorable rate might just be betting minority.
I think the problem with a prediction market is you need a payout mechanism, that values the shares at the close of business, for elections there is a reasonable structure.
For situations where there isn’t a clear solution or termination that gets much more complicated.
The UBC is able to do a non-profit elections prediction market, and it generally does better than the average of the top 5 pollsters.
The popular vote market is you pay $1 for 1 share of CON, LIB, NDP, Green, Other, and you can trade shares like a stockmarket.
The ending payout is $1 * % of popular vote that group gets.
There are other markets such as a seat market, and a majority market.
The majority market pays 50⁄50 if no majority is reached, and 100⁄0 otherwise, which makes it pretty awkward in some respects. Generally predicting a minority government the most profitable action is to try and trade for shares of the loser. This is probably the main reason its restricted to the two parties with a chance of winning one if it were the same 5 way system, trading LIB and CON for GREEN, OTHER and NDP to exploit a minority government would probably bias the results. In this case in a minority the payout would be 20/20/20/20/20, but many traders would be willing to practically throw away shares of GREEN, OTHER and NDP because they “know” those parties have a 0% chance of winning a majority. This leads to artificial devaluation and bad prediction information.
By trading 1 share of CON for 5 GREEN and 5 OTHER, you just made 10 times the money in a minority government, and that’s the payoff you’re looking for instead of saying that you think the combined chances of Green and Other winning a majority is 1/6th that of the conservatives winning.
Of course they still have this problem with Liberals and Conservatives where trading out of a party at a favorable rate might just be betting minority.
I think the problem with a prediction market is you need a payout mechanism, that values the shares at the close of business, for elections there is a reasonable structure.
For situations where there isn’t a clear solution or termination that gets much more complicated.