Reader “Big Chase” to me (with permission to republish his/her e-mail here):
Subject: Conditional chance formula
Message: 1. With regard to the blog entry “Is there manipulation in the Hillary Clinton Intrade market?“, what is the reason/value of distinguishing between Hillary’s chance of becoming president from her “conditional chancel” to become president? Isn’t her chance to become president simply the price of the “Hillary president contract”? Why multiply that by the “Hillary nomination” contract?
2. I have yet to fund prediction market account. Do you know where I can find an explanation of the legal risks assumed by a US citizen (NY state) who trades in these markets? Would you trust InTrade with $5,000?
Big Chase:
One of the reasons to apply conditional probabilities analysis is to detect for false positives. Derek Lowe, at pipeline.corante.com just posted recently about an Alzheimer’s blood test that was 91% effective. The profession currently estimates 5% of the elderly have Alzheimer’s. By using conditional probablities, we determine that 8.5% of people tested will be incorrectly diagnosed with the disease.
In the case of the Hillary contract, it is useful to compare PRESIDENT.DEM.2008 to 2008DEM.NOM.CLINTON and 2008.PRES.CLINTON(H). The probability of the Democratic nominee winning the White House is about 64%. The conditional probability of Hillary winning the White House is 65% (= 48% winning presidency | 74% winning nomination).
Should these diverge, then manipulation could be possible.
Also, I’ve never had problems receiving withdrawal checks from Tradesports. I’ve only requested 2 in the last 2 years, and none in 2007.
As far as official legal advice, please consult your own counsel. As far as data about prosecuting individual users of Tradesports, I am not aware of any.