Many thanks for the pointer to LMSR! That seems to answer all my questions.
(Why aren’t scoring rules mentioned in the Wikipedia article on prediction markets? I had a vague idea of what prediction parkets were, but it turns out I missed the most important part, and asked a whole bunch of ignorant questions… Anyway, it’s a relief to finally understand this stuff.)
They should be. Just a matter of someone stepping up to write that section. The modern theory on market makers has existed for less than a decade and only matured in the last few years, so it just hasn’t had time to percolate out. Even here on Less Wrong, where prediction markets are very salient and Hanson is well known, there isn’t a good explanation of the state of the art. I have a sequence in the works on prediction markets, scoring rules, and mechanism design in an attempt to correct that.
Many thanks for the pointer to LMSR! That seems to answer all my questions.
(Why aren’t scoring rules mentioned in the Wikipedia article on prediction markets? I had a vague idea of what prediction parkets were, but it turns out I missed the most important part, and asked a whole bunch of ignorant questions… Anyway, it’s a relief to finally understand this stuff.)
They should be. Just a matter of someone stepping up to write that section. The modern theory on market makers has existed for less than a decade and only matured in the last few years, so it just hasn’t had time to percolate out. Even here on Less Wrong, where prediction markets are very salient and Hanson is well known, there isn’t a good explanation of the state of the art. I have a sequence in the works on prediction markets, scoring rules, and mechanism design in an attempt to correct that.
That would be great! If you need someone to read drafts, I’d be very willing :-)