Via his Australian co-writer Andrew Leigh, Prediction markets for business and public policy (PDF file).
Read prawf Tom Bell’s take on the prediction market petition, circa last month, for more info.
Steve Levitt and Tyler Cowen’s darling Justin Wolfers is doing in Australia what he should have been doing in the U.S. from day one: LOBBYING FOR LEGALIZING FOR-PROFIT REAL-MONEY PREDICTION EXCHANGES.
Steve Levitt and Tyler Cowen’s darling Justin Wolfers is doing in Australia what he should have been doing in the U.S. from day one: LOBBYING FOR LEGALIZING FOR-PROFIT REAL-MONEY PREDICTION EXCHANGES.
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Wolfers and Leigh say prediction markets typically fail in cases in which insiders have a superior information advantage. But we see lots of prediction market (and straightforward gambling) activity on the outcomes of fictional stories (Will Tony get whacked to end the Sopranos? Will Harry Potter get whacked in book 7? Etc.)
Aren’t these cases in which there are certainly insiders with a superior information advantage? I don’t see J.K. Rowling hustling down to her corner bookie to lay odds on Harry’s fate, but over at the publicists’ office, or the printers, or somewhere in the multinational corporate chain engaged to market the book, someone is going to know before the book is out.
And in any case, what information is the non-inside public going to bet on? “Feelings” about what Tony Soprano deserves, or about how J.K. Rowling wouldn’t allow X or must allow Y? Are bettors going to re-read books 1 through 6 for clues?
Statistically speaking, what is the relationship between what is written in the first 6 books of a 7-book series and the fate of the central character in the 7th book? I’m not sure there is much to go on here, and instead bettors are betting on emotion, and the gambling houses will clean up.
Michael Giberson,
You should make this a blog post, as opposed to a comment, because it’s an interesting take, which deserves to be read (and maybe answered) by all our readers.
Related reading:
It is odds on that quirky sporting bets will be banned to beat cheats
http://www.timesonline.co.uk/t.....851855.ece
I agree.
I’m in the middle of a post on this topic that will show up at Knowledge Problem (sorry, no deep link yet), and I’ll cross post it here (with a deep link) in a few minutes.
I will be its first reader.