The penies on the market for Biden win reflected the very small odds it would be overturned. How can the author not understand this?
Prediction markets have an elections problem
71–80 of 201 posts
Re: Prediction markets have an elections problem
#72[deleted]
Re: Prediction markets have an elections problem
#73There's no problem here at all; except perhaps the wildly absurd fantasy of "perfectly rational (and/or intelligent) markets," which the popularity of e.g. lotteries and casinos immediately disproves. Not much to see here.
The number of people who have told me "because betting markets have Trump at X% in 2024, that's the odds that he wins" in the past six months is staggering. I think some distribution of the idea that betting markets aren't actually pure likelihood estimators is a good thing.
Re: Prediction markets have an elections problem
#74The author does not understand bid-ask spreads, does not understand distortions created by fees, does not understand that the last trade price is not the same as what you can get at present, and just generally does not understand the realities of trading in markets. This article is a zero-information void.
The article shows that the average predicted likelihood is frequently illogical. That is not zero-information.
> average predicted likelihood is frequently illogical
What is being pointed out is that is not illogical when you fully understand it.
I will let you bet me that Taylor Swift is not the current president of the United States. For every $1 you bet, I will return $1.05 to you*. You can bet as much as you like and as often as you want - my email address is in my profile.
* 10% transaction fee applies
Re: Prediction markets have an elections problem
#75The example the author gives is the 2020 election. Without rehashing anything or endorsing anyone’s viewpoint, there were lots of issues being raised, lots of court cases in flight, and possible procedural issues in the states and in the Congress related to electors and certification. The election wasn’t “over” until certification happened (late) on January 6. Why should bettors be prohibited from continuing to bet?…
Elections should be perceived to be conducted in a fair and impartial manner as well as actually be conducted fairly and impartially. Therefore, betting on elections should be banned because an incentive is created to rig the outcome.
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Re: Prediction markets have an elections problem
#76The example the author gives is the 2020 election. Without rehashing anything or endorsing anyone’s viewpoint, there were lots of issues being raised, lots of court cases in flight, and possible procedural issues in the states and in the Congress related to electors and certification. The election wasn’t “over” until certification happened (late) on January 6. Why should bettors be prohibited from continuing to bet?…
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Re: Prediction markets have an elections problem
#77Earlier quoted context omitted.
The article shows that the average predicted likelihood is frequently illogical. That is not zero-information.
But those things at least partly explain the apparent irrationality. PredictIt charges 10% fee on profits and another 5% fee on withdrawals. So bets that have the potential to earn a few cents on the dollar aren't necessarily worth it. That's before considering how long you have to lock up your money in this contract.
The implied probability of Brexit a few days before was around 25%. The implied probability of Trump beating Clinton a few days before was around 20%.
Neither the time value of money nor the cost of trading explain these dislocations.
Re: Prediction markets have an elections problem
#78Earlier quoted context omitted.
But those things at least partly explain the apparent irrationality. PredictIt charges 10% fee on profits and another 5% fee on withdrawals. So bets that have the potential to earn a few cents on the dollar aren't necessarily worth it. That's before considering how long you have to lock up your money in this contract.
The implied probability of Brexit a few days before was around 25%. The implied probability of Trump beating Clinton a few days before was around 20%. Neither the time value of money nor the cost of trading explain these dislocations.
The polls implied about a 20% chance of Trump beating Clinton too. I guess I'm not sure what you're getting at. That seems like the perfect example of not a sure thing.
Re: Prediction markets have an elections problem
#79There's no problem here at all; except perhaps the wildly absurd fantasy of "perfectly rational (and/or intelligent) markets," which the popularity of e.g. lotteries and casinos immediately disproves. Not much to see here.
The number of people who have told me "because betting markets have Trump at X% in 2024, that's the odds that he wins" in the past six months is staggering. I think some distribution of the idea that betting markets aren't actually pure likelihood estimators is a good thing.
[deleted]
Re: Prediction markets have an elections problem
#80Is it actually possible to make money against these small odds predictions? If I look at this page, it has dems win by 215+ at 2 cents. https://www.predictit.org/markets/detail/8077/What-will-be-t... So I buy a "no" contract for 98 cents, and sell it for $1 in most of a year. Maybe someone who has used the platform can chime in, but the terms of service seem to suggest I don't get any interest on my contract money me…
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The article is basically asking why the smart money hasn't pushed the No contract to trading for 99.9 cents or something. I'm saying the smart money would walk away at 96 cents or so because it's a lose-lose at that point.