We could expect prices prior to end of quarter to be strange, then, and potentially containing very strange information, but can also argue it shouldn’t matter. So this is like the two-stage proposal. In stage 1 board decides whether to fire or not anyway, in stage 2 the prediction market decides whether to fire him anyway with a burst of activity, which has the advantage that you get your money back fast if it doesn’t happen, and if it does happen you can just be long/short the stock. then if the board decides to fire him because it was ‘too close’ then the trades are void. And ideally the board will fire him if they see him doing something to manipulate the conditional values in his favor, although we’d worry the board would mostly abdicate firing responsibilities and justify it by pointing at the market.
Definitely seems better than either of my listed scenarios. The perverse effects are at least less perverse, although I suspect they’re still quite perverse. Trading in a market that only matters if it is later trading in a certain range is super weird. As would be the CEO response behavior. I wonder what one says and does to maximize share price when not fired relative to share price when fired, instead of maximizing share prices...
We could expect prices prior to end of quarter to be strange, then, and potentially containing very strange information, but can also argue it shouldn’t matter. So this is like the two-stage proposal. In stage 1 board decides whether to fire or not anyway, in stage 2 the prediction market decides whether to fire him anyway with a burst of activity, which has the advantage that you get your money back fast if it doesn’t happen, and if it does happen you can just be long/short the stock. then if the board decides to fire him because it was ‘too close’ then the trades are void. And ideally the board will fire him if they see him doing something to manipulate the conditional values in his favor, although we’d worry the board would mostly abdicate firing responsibilities and justify it by pointing at the market.
Definitely seems better than either of my listed scenarios. The perverse effects are at least less perverse, although I suspect they’re still quite perverse. Trading in a market that only matters if it is later trading in a certain range is super weird. As would be the CEO response behavior. I wonder what one says and does to maximize share price when not fired relative to share price when fired, instead of maximizing share prices...
Sabotage succession planning and otherwise maximize key person risk focused on oneself?
How much less do you expect this to happen under the current system?
Yes, that’s definitely level 1, but I’m guessing the rabbit hole goes much deeper...