A parallel problem with prediction markets: at non-financial-industry scales: they’re used as signals of confidence. How often do you see, after someone makes a bold claim, a response saying to “put your money where your mouth is.” But just the act of signalling confidence can be intrinsically valuable to the person making a claim. In bet-capped places like predictit, this can make equilibrium that are different from optimal, because there are non-monetary incentives at work.
A parallel problem with prediction markets: at non-financial-industry scales: they’re used as signals of confidence. How often do you see, after someone makes a bold claim, a response saying to “put your money where your mouth is.” But just the act of signalling confidence can be intrinsically valuable to the person making a claim. In bet-capped places like predictit, this can make equilibrium that are different from optimal, because there are non-monetary incentives at work.