Comments on: simExchange a Keynesian Beauty Contest http://www.midasoracle.org/2007/03/06/simexchange-a-keynesian-beauty-contest/ Prediction Markets + Market Predictions = Collective Forecasting That Pays Off Sun, 21 Mar 2010 14:11:54 -0400 hourly 1 By: Jason Ruspini http://www.midasoracle.org/2007/03/06/simexchange-a-keynesian-beauty-contest/#comment-6130 Jason Ruspini Wed, 07 Mar 2007 05:48:24 +0000 http://www.midasoracle.org/2007/03/06/simexchange-a-keynesian-beauty-contest/#comment-6130 I know little of SimExchange, but at this point I would guess that most video games (individual titles that is, not incarnations of the same series) have much of their lifetime sales within the first few years. It is also probably easy to establish benchmark titles and "comps" so that it would be rather infeasible to bid up a new title arbitrarily, as if it might experience material sales into perpetuity. If 50% of sales typically occur within the first year, and title X has sold only 100,000 but is priced at 400,000 one year in, a trade suggests itself. One cannot argue that this logic is more complicated (and the price therefore subject to more manipulation) than that which values a company. Liquidity and real vs play money are other issues. Prediction markets should of course always be tied to something objective, but for quickly obsolescent products, having no fixed settlement date seems tolerable enough. SimExchange could easily add 1,2,3,etc year maturities for each title to make the "annuities" more explicit. I know little of SimExchange, but at this point I would guess that most video games (individual titles that is, not incarnations of the same series) have much of their lifetime sales within the first few years. It is also probably easy to establish benchmark titles and “comps” so that it would be rather infeasible to bid up a new title arbitrarily, as if it might experience material sales into perpetuity. If 50% of sales typically occur within the first year, and title X has sold only 100,000 but is priced at 400,000 one year in, a trade suggests itself. One cannot argue that this logic is more complicated (and the price therefore subject to more manipulation) than that which values a company. Liquidity and real vs play money are other issues.

Prediction markets should of course always be tied to something objective, but for quickly obsolescent products, having no fixed settlement date seems tolerable enough. SimExchange could easily add 1,2,3,etc year maturities for each title to make the “annuities” more explicit.

]]>