Prediction markets have an elections problem • Hacker News Board

Re: Prediction markets have an elections problem

#141

Post by mikeyouse » Tue, Jan 30, 2024, 2:40 AM UTC

dataflow wrote: post #96

teraflop wrote: post #54

Earlier quoted context omitted.

The one and only time I traded on PredictIt, around the beginning of the pandemic, I made an easy couple hundred bucks on this market: https://www.predictit.org/markets/detail/4683 The majority of traders seemingly looked at the headline and failed to understand the contract terms, which only required a "quarterly annualized" GDP growth of 5%, during at least one quarter of 2020. So a severe economic downturn in Q2,…

> The majority of traders seemingly looked at the headline and failed to understand the contract term Nice way to blame the masses. Seems to me more like the terms contradicted the headline, thus making this a mechanism for exploiting people who assume they're making an honest bet. Seems like fraud, honestly.

Seems like fraud to spell out the terms of the bet in plain language and then enforce those terms?

The annual rate of increase in real gross domestic product (GDP) in one or more quarters prior to or including the fourth quarter of 2020, as rounded to the nearest tenth of a percent, per the advance, second or third estimate, as published subsequent to the launch of this market for any such quarter by the Bureau of Economic Analysis (BEA), shall be 5.0% or higher.

Re: Prediction markets have an elections problem

#142

Post by samschw » Tue, Jan 30, 2024, 2:42 AM UTC

I think the better title here is Prediction markets have a regulation problem. Out of the prediction markets you mentioned only one is regulated: Kalshi and only one is unable to list election markets: Kalshi. With their current lawsuit against the CFTC I am hopeful regulated election markets will be a reality very soon

Re: Prediction markets have an elections problem

#143

Post by jamilton » Tue, Jan 30, 2024, 2:42 AM UTC

vagab0nd wrote: post #124

Someday, I'll be able to buy the prediction that my travel destination rains during my stay there. Someday.

Kalshi has some weather markets, but I have no clue how they compare to just checking forecasts.

Re: Prediction markets have an elections problem

#144

Post by dataflow » Tue, Jan 30, 2024, 2:44 AM UTC

mikeyouse wrote: post #141

dataflow wrote: post #96

Earlier quoted context omitted.

> The majority of traders seemingly looked at the headline and failed to understand the contract term Nice way to blame the masses. Seems to me more like the terms contradicted the headline, thus making this a mechanism for exploiting people who assume they're making an honest bet. Seems like fraud, honestly.

Seems like fraud to spell out the terms of the bet in plain language and then enforce those terms? The annual rate of increase in real gross domestic product (GDP) in one or more quarters prior to or including the fourth quarter of 2020, as rounded to the nearest tenth of a percent, per the advance, second or third estimate, as published subsequent to the launch of this market for any such quarter by the Bureau of Ec…

Are you seriously claiming the average person's interpretation of "Will the US economy hit 5.0%+ GDP growth by year-end 2020?" would match the "spelled out terms"?

Re: Prediction markets have an elections problem

#145

Post by brlewis » Tue, Jan 30, 2024, 3:20 AM UTC

HDThoreaun wrote: post #140

jrm4 wrote: post #47

There'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.

Lotteries are rational when you consider the entertainment value. Most lottery players dont expect to win, but as long as theres the possibility it allows them to daydream about what they would do if they did.

Citation please. Rational entertainment would predict poorer people playing the lottery less than rich people, which afaik is not how it happens.

Re: Prediction markets have an elections problem

#146

Post by kqr » Tue, Jan 30, 2024, 3:26 AM UTC

HDThoreaun wrote: post #140

jrm4 wrote: post #47

There'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.

Lotteries are rational when you consider the entertainment value. Most lottery players dont expect to win, but as long as theres the possibility it allows them to daydream about what they would do if they did.

Indeed. Negative-sum games (like lotteries) are a form of consumption. From the player's perspective they should be compared to other forms of consumption like buying a beer or a rollercoaster ride. You do it for temporary pleasure, not as an investment.

Most players are fully aware of this, just as most beer-drinkers drink in moderation. (See Brenner, Brenner & Brown for more data.)

Re: Prediction markets have an elections problem

#147

Post by kqr » Tue, Jan 30, 2024, 3:29 AM UTC

brlewis wrote: post #145

HDThoreaun wrote: post #140

Earlier quoted context omitted.

Lotteries are rational when you consider the entertainment value. Most lottery players dont expect to win, but as long as theres the possibility it allows them to daydream about what they would do if they did.

Citation please. Rational entertainment would predict poorer people playing the lottery less than rich people, which afaik is not how it happens.

Lotteries are a comparatively cheap form of entertainment.

Rich people can go to tennis matches, get a pilot's licence, and buy stock options. Poor people have much fewer alternatives.

Re: Prediction markets have an elections problem

#148

Post by kqr » Tue, Jan 30, 2024, 3:33 AM UTC

aleph_minus_one wrote: post #114

jrm4 wrote: post #47

There'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.

> There'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 behaviour of customers of lotteries is indeed clearly not perfectly rational if you consider the monetary expected value of your wins. On the other hand, the customers' behaviour gets much mo…

I have heard this argument before but I don't get it. Especially since evidence seems to show people generally have concave utility for money. (Under the assumption of concave utility, insurance is a better deal than it seems, but lotteries a worse deal than they seem -- even when one diversifies.)

What is the exact shape of the convex utility function you theorise these people have? And what data supports that?

Re: Prediction markets have an elections problem

#149

Post by kqr » Tue, Jan 30, 2024, 3:36 AM UTC

hobs wrote: post #128

vagab0nd wrote: post #124

Someday, I'll be able to buy the prediction that my travel destination rains during my stay there. Someday.

It's not that far away, they already sell insurance for this problem.

Do you have a link? This is something I've wanted.

Re: Prediction markets have an elections problem

#150

Post by kqr » Tue, Jan 30, 2024, 3:45 AM UTC

powerbroker wrote: post #98

Am I the only one who notices this article professes to be published _February_ 2024, as I read it on January 29, 2024? It seems like a mistake a time traveler would make... who doesn't care enough to fix their mistakes.

I'm unrelated to this article but I often share previews of new unpublished articles with HN to get intelligent feedback on them.