I wonder if anyone has considered or built prediction markets that can pay out repeatedly: an example could be “people who fill in this feedback form will say that they would recommend the event to others”, and each response that says yes causes shorts to pay longs (or noes pay yesses) and vice versa.
You’d need some mechanism to cap losses. I guess one way to model it is as a series of markets of the form “the Nth response will say yes”, and a convenient interface to trade in the first N markets at a single price. That way, after a few payouts your exposure automatically closes. That said, it might make more sense to close out after a specified number of losses, rather than a specified number of resolutions (i.e. no reason to cap the upside) but it’s less clear to me whether that structure has any hidden complexity.
The advantages over a single market that resolves to a percentage of yesses are probably pretty marginal? Most significant where there isn’t going to be an obvious end time, but I don’t have any examples of that immediately.
In general there’s a big space of functions from consequences to payouts. Most of them probably don’t make good “products”, but maybe more do than are currently explored.
In markets like these, “cap losses” is equivalent to “cap wins”—the actual money is zero-sum, right? There certainly exist wagers that scale ($10 per point difference, on a sporting event, for instance), and a LOT of financial investing has this structure (stocks have no theoretical maximum value).
I think your capping mechanism gets most of the value—maybe not “the Nth response is yes”, but markets for a couple different sizes of vote counts, with thresholds for averages. “wins if over 10,000 responses with 65% yes, loses if over 10,000 less than 65% yes, money returned if fewer than 10,000 responses”, with a number of wagers allowed with different size limits.
In markets like these, “cap losses” is equivalent to “cap wins”—the actual money is zero-sum, right?
Overall, yes, per-participant no. For example, if everyone caps their loss at $1 I can still win $10 by betting against ten different people, though of course only at most 1 in 11 market participants will be able to do this.
There certainly exist wagers that scale ($10 per point difference, on a sporting event, for instance), and a LOT of financial investing has this structure (stocks have no theoretical maximum value).
Yeah, although the prototypical prediction market has contracts with two possible valuations, even existing prediction markets also support contracts that settle to a specific value. The thing that felt new to me about the idea I had was that you could have prediction contracts that pay out at times other than the end of their life, though it’s unclear to me whether this is actually more expressive than packaged portfolios of binary, payout-then-disappear contracts.
(Portfolios of derivatives that can be traded atomically are nontrivially more useful than only being able to trade one “leg” at a time, and are another thing that exist in traditional finance but mostly don’t exist in prediction markets. My impression there, though, is that these composite derivatives are often just a marketing ploy by banks to sell clients things that are tricky to price accurately, so they can hide a bigger markup on them; I’m not sure a more co-operative market would bother with them.)
I wonder if anyone has considered or built prediction markets that can pay out repeatedly: an example could be “people who fill in this feedback form will say that they would recommend the event to others”, and each response that says yes causes shorts to pay longs (or noes pay yesses) and vice versa.
You’d need some mechanism to cap losses. I guess one way to model it is as a series of markets of the form “the Nth response will say yes”, and a convenient interface to trade in the first N markets at a single price. That way, after a few payouts your exposure automatically closes. That said, it might make more sense to close out after a specified number of losses, rather than a specified number of resolutions (i.e. no reason to cap the upside) but it’s less clear to me whether that structure has any hidden complexity.
The advantages over a single market that resolves to a percentage of yesses are probably pretty marginal? Most significant where there isn’t going to be an obvious end time, but I don’t have any examples of that immediately.
In general there’s a big space of functions from consequences to payouts. Most of them probably don’t make good “products”, but maybe more do than are currently explored.
In markets like these, “cap losses” is equivalent to “cap wins”—the actual money is zero-sum, right? There certainly exist wagers that scale ($10 per point difference, on a sporting event, for instance), and a LOT of financial investing has this structure (stocks have no theoretical maximum value).
I think your capping mechanism gets most of the value—maybe not “the Nth response is yes”, but markets for a couple different sizes of vote counts, with thresholds for averages. “wins if over 10,000 responses with 65% yes, loses if over 10,000 less than 65% yes, money returned if fewer than 10,000 responses”, with a number of wagers allowed with different size limits.
Overall, yes, per-participant no. For example, if everyone caps their loss at $1 I can still win $10 by betting against ten different people, though of course only at most 1 in 11 market participants will be able to do this.
Yeah, although the prototypical prediction market has contracts with two possible valuations, even existing prediction markets also support contracts that settle to a specific value. The thing that felt new to me about the idea I had was that you could have prediction contracts that pay out at times other than the end of their life, though it’s unclear to me whether this is actually more expressive than packaged portfolios of binary, payout-then-disappear contracts.
(Portfolios of derivatives that can be traded atomically are nontrivially more useful than only being able to trade one “leg” at a time, and are another thing that exist in traditional finance but mostly don’t exist in prediction markets. My impression there, though, is that these composite derivatives are often just a marketing ploy by banks to sell clients things that are tricky to price accurately, so they can hide a bigger markup on them; I’m not sure a more co-operative market would bother with them.)