Seems like the PredictIt model of turning the questions into Yes/No questions where either side can bid up or down solves a lot of these. Or am I misunderstanding?
Prediction markets also have problems around events with very low probability, as it is unattractive to lay bet low probability events, both qualitatively (people don’t like risking a lot of money for a small reward), and also quantitatively (you can often get similar returns just investing the money, usually at lower risk).
The latter of these problems is in theory solveable by an exchange paying interest on stakes, or by using fractions of stocks as currency, but neither of these options is implemented in a major market.
Yeah, it solves some, but not all. For example, not the “incentives not to share information and to produce corrupt information” e.g., PredictIt traders may have created fake polls in the past.
I guess I didn’t/don’t think of that as a goal of prediction markets.
The public gets value from the outputs of the market. One of the values of them is being able to get information from insiders who have info that they wouldn’t have otherwise shared. Bad data is always a risk with or without prediction markets.
So specifically, in forecasting tournaments, if A knows that “X”, and B knows that “X=>Y”, and both leave a comment, then the aggregate can come to “Y”, particularly if A and B are incentivized with respect and upvotes from other forecasters. In prediction markets, this is trickier (there may not even be a comments section).
Seems like the PredictIt model of turning the questions into Yes/No questions where either side can bid up or down solves a lot of these. Or am I misunderstanding?
Prediction markets also have problems around events with very low probability, as it is unattractive to lay bet low probability events, both qualitatively (people don’t like risking a lot of money for a small reward), and also quantitatively (you can often get similar returns just investing the money, usually at lower risk).
The latter of these problems is in theory solveable by an exchange paying interest on stakes, or by using fractions of stocks as currency, but neither of these options is implemented in a major market.
Yeah, it solves some, but not all. For example, not the “incentives not to share information and to produce corrupt information” e.g., PredictIt traders may have created fake polls in the past.
Agreed.
I guess I didn’t/don’t think of that as a goal of prediction markets.
The public gets value from the outputs of the market. One of the values of them is being able to get information from insiders who have info that they wouldn’t have otherwise shared. Bad data is always a risk with or without prediction markets.
So specifically, in forecasting tournaments, if A knows that “X”, and B knows that “X=>Y”, and both leave a comment, then the aggregate can come to “Y”, particularly if A and B are incentivized with respect and upvotes from other forecasters. In prediction markets, this is trickier (there may not even be a comments section).