Comments on: Is Manipulation Good for a Prediction Market? Accuracy Isn’t Everything. http://www.midasoracle.org/2007/07/09/is-manipulation-good-for-a-prediction-market-accuracy-isnt-everything/ Prediction Markets For All Tue, 02 Dec 2008 15:54:39 +0000 http://wordpress.org/?v=2.6.5 By: Medemi http://www.midasoracle.org/2007/07/09/is-manipulation-good-for-a-prediction-market-accuracy-isnt-everything/#comment-19010 Medemi Tue, 03 Jun 2008 18:48:36 +0000 http://www.midasoracle.org/2007/07/09/is-manipulation-good-for-a-prediction-market-accuracy-isnt-everything/#comment-19010 My God, Ed... What a country you live in, if you can't even trust the weather report anymore. I knew it was fucked up, but it never seizes to amaze me. My God, Ed… What a country you live in, if you can’t even trust the weather report anymore.
I knew it was fucked up, but it never seizes to amaze me.

]]> By: Ed Murray http://www.midasoracle.org/2007/07/09/is-manipulation-good-for-a-prediction-market-accuracy-isnt-everything/#comment-19008 Ed Murray Tue, 03 Jun 2008 14:14:40 +0000 http://www.midasoracle.org/2007/07/09/is-manipulation-good-for-a-prediction-market-accuracy-isnt-everything/#comment-19008 There is market manipulation through weight of money, trying to squeeze a market if you are a relatively big trader (this works well in markets where real information is scarce, but there is a high level of fear that <em>someone</em> knows something).  - However, market manipulation also incentivizes corruption of information given to market participants, e.g. deliberate scare stories at a time when the market is already jittery, can have a powerful effect, as was seen very recently in the UK by the example medemi gave.  - Overall, I'm disinclined towards the view that profits should accrue in any market to people who deliberately try to deceive other market participants, in an attempt to profit from scaring others.  It results in a non Pareto-optimal allocation of resources in the economy. - One (of many) examples from the sports markets happened when someone writing the weather reports for the BBC website two years ago mysteriously predicted heavy rain whenever there was a cricket test match coming up. (Rain sends the draw price crashing from normally about a 1 in 3 chance to an odds on favourite). This crashed the BF price on the draw in cricket test matches, until people stopped believing the BBC website weather reports. Imo, you have a responsibility to be honest as a journalist, and do the job you are paid for. There is market manipulation through weight of money, trying to squeeze a market if you are a relatively big trader (this works well in markets where real information is scarce, but there is a high level of fear that someone knows something). 
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However, market manipulation also incentivizes corruption of information given to market participants, e.g. deliberate scare stories at a time when the market is already jittery, can have a powerful effect, as was seen very recently in the UK by the example medemi gave. 
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Overall, I’m disinclined towards the view that profits should accrue in any market to people who deliberately try to deceive other market participants, in an attempt to profit from scaring others.  It results in a non Pareto-optimal allocation of resources in the economy.
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One (of many) examples from the sports markets happened when someone writing the weather reports for the BBC website two years ago mysteriously predicted heavy rain whenever there was a cricket test match coming up. (Rain sends the draw price crashing from normally about a 1 in 3 chance to an odds on favourite). This crashed the BF price on the draw in cricket test matches, until people stopped believing the BBC website weather reports. Imo, you have a responsibility to be honest as a journalist, and do the job you are paid for.

]]> By: Medemi http://www.midasoracle.org/2007/07/09/is-manipulation-good-for-a-prediction-market-accuracy-isnt-everything/#comment-19002 Medemi Mon, 02 Jun 2008 23:14:50 +0000 http://www.midasoracle.org/2007/07/09/is-manipulation-good-for-a-prediction-market-accuracy-isnt-everything/#comment-19002 Michael, - I don't think you fully understand the risks associated with market manipulation. The entire financial system could have collapsed not so long ago. - <em>Sally Dewar, managing director, wholesale and institutional markets at the FSA, said: "There has been a series of completely unfounded rumours about UK financial institutions in the London market over the last few days, sometimes accompanied by short-selling. We will not tolerate market participants taking advantage of the current market conditions to commit abuse by spreading false rumours and dealing on the back of them".</em> <em>"We remind market participants of the need to take extra care, in this market climate, to adhere to the market code of conduct," she said. </em>   <a href="http://www.guardian.co.uk/business/2008/mar/19/marketturmoil.creditcrunch" rel="nofollow">http://www.guardian.co.uk/business/2008/mar/19/marketturmoil.creditcrunch</a> Michael,
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I don’t think you fully understand the risks associated with market manipulation.
The entire financial system could have collapsed not so long ago.
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Sally Dewar, managing director, wholesale and institutional markets at the FSA, said: “There has been a series of completely unfounded rumours about UK financial institutions in the London market over the last few days, sometimes accompanied by short-selling. We will not tolerate market participants taking advantage of the current market conditions to commit abuse by spreading false rumours and dealing on the back of them”.
“We remind market participants of the need to take extra care, in this market climate, to adhere to the market code of conduct,” she said.

  http://www.guardian.co.uk/busi.....editcrunch

]]> By: Robin Hanson http://www.midasoracle.org/2007/07/09/is-manipulation-good-for-a-prediction-market-accuracy-isnt-everything/#comment-15927 Robin Hanson Sat, 14 Jul 2007 01:23:14 +0000 http://www.midasoracle.org/2007/07/09/is-manipulation-good-for-a-prediction-market-accuracy-isnt-everything/#comment-15927 It would be nice to see a more concrete model of your #2 concern, to see if a coherent story can be constructed to reify it. Your #3 concern is really the same one; people could just model manipulation as simple noise, but they might feel they need a more elaborate model if in fact something like #2 might be going on. It would be nice to see a more concrete model of your #2 concern, to see if a coherent story can be constructed to reify it. Your #3 concern is really the same one; people could just model manipulation as simple noise, but they might feel they need a more elaborate model if in fact something like #2 might be going on.

]]> By: Michael Giberson http://www.midasoracle.org/2007/07/09/is-manipulation-good-for-a-prediction-market-accuracy-isnt-everything/#comment-15898 Michael Giberson Wed, 11 Jul 2007 02:51:17 +0000 http://www.midasoracle.org/2007/07/09/is-manipulation-good-for-a-prediction-market-accuracy-isnt-everything/#comment-15898 Response is up: <a href="http://www.midasoracle.org/2007/07/10/what-should-be-done-about-manipulation-of-prediction-markets/" title="Giberson replies to the above post.">What should be Done about Manipulation of Prediction Markets?</a> Response is up: What should be Done about Manipulation of Prediction Markets?

]]> By: Michael Giberson http://www.midasoracle.org/2007/07/09/is-manipulation-good-for-a-prediction-market-accuracy-isnt-everything/#comment-15896 Michael Giberson Tue, 10 Jul 2007 12:10:27 +0000 http://www.midasoracle.org/2007/07/09/is-manipulation-good-for-a-prediction-market-accuracy-isnt-everything/#comment-15896 I like your counter reasons, but tend toward the view that rather than disdain manipulation, prediction markets should adapt to the inherent possibility of manipulation. There is a certain amount of irony present in the 'manipulators subsidize informed traders' idea, which may be why I focused on the 'good news' about manipulation. You present some useful balance to my one sided presentation. The next interesting issue is, given the pluses and minuses surroundings manipulation, what to do about it. I'll post my thoughts on this topic in a day or so. I like your counter reasons, but tend toward the view that rather than disdain manipulation, prediction markets should adapt to the inherent possibility of manipulation.

There is a certain amount of irony present in the ‘manipulators subsidize informed traders’ idea, which may be why I focused on the ‘good news’ about manipulation. You present some useful balance to my one sided presentation. The next interesting issue is, given the pluses and minuses surroundings manipulation, what to do about it. I’ll post my thoughts on this topic in a day or so.

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