For L], what would be the effect of scenario 1.5 - CEOs are fired if (but not only if) they are judged to be bad for the stock price?
There would be an option that if the CEO is fired for other reasons than the prediction market that the market doesn’t pay out and all bets are refunded—not sure if this would help or hinder!
Note: There’s an unfinished sentence in this section, end of 3rd to last paragraph
You’d have to draw that distinction cleanly. So you’d have to do this in two stages, maybe. First, you decide whether or not you want to fire the CEO for non-predictive causes. Then, you hold a prediction market, and fire the CEO if and only if the prediction market says so, perhaps with a threshold rule set during phase 1. Otherwise, the board can look at the market, and it will impact their decision otherwise, especially if they prefer one way of firing to the other (e.g. they want the credit or to avoid the blame, or the payouts are different, etc).
Also, if you include cases where the market exists but gets refunded, that decreases market interest and increases distortions.
For L], what would be the effect of scenario 1.5 - CEOs are fired if (but not only if) they are judged to be bad for the stock price?
There would be an option that if the CEO is fired for other reasons than the prediction market that the market doesn’t pay out and all bets are refunded—not sure if this would help or hinder!
Note: There’s an unfinished sentence in this section, end of 3rd to last paragraph
On note: Ah, thanks for the catch. It finishes “this won’t work” as you likely guessed.
You’d have to draw that distinction cleanly. So you’d have to do this in two stages, maybe. First, you decide whether or not you want to fire the CEO for non-predictive causes. Then, you hold a prediction market, and fire the CEO if and only if the prediction market says so, perhaps with a threshold rule set during phase 1. Otherwise, the board can look at the market, and it will impact their decision otherwise, especially if they prefer one way of firing to the other (e.g. they want the credit or to avoid the blame, or the payouts are different, etc).
Also, if you include cases where the market exists but gets refunded, that decreases market interest and increases distortions.