BetFair Starting Price = Simplified Trading —just like MSR is, but without an AMM.
Chris F. Masse February 2nd, 2008
My challenge to Robin Hanson and Justin Wolfers: Blog about the BetFair Starting Price.
Take my sub-title as a follow-up (in good spirit) on Robin Hanson’s comment, here. 
I’ll go first —after acknowledging Steve High, the inventor of the BetFair SP. (For those who first want to read the explainer on the BetFair SP, Midas Oracle is here to help.)
- In June 2000, a BetFair team paraded in the street of around Russell Square in central London, in a mock funeral, to mark “the death of the bookmaker”. In hindsight, their publicity stunt was too cocky, since BetFair’s market share today has reached 5% only. On the other hand, the introduction of the BetFair Starting Prices will probably be the true killer ap.
- BetFair’s Stating Prices and Robin Hanson’s Market Scoring Rules have one thing in common: they were invented for one particular reason (to rebel against the BetFair exclusion in the making of the traditional Starting Prices, in one case, and to solve the thin-market problem, in the second case), but both approaches endend up in discovering simplified trading —you just indicate the direction of your bet, and the amount of money you bet (you do not set your own prices, but you trade anyway).
- People with memory will remember that the executives of the prediction exchanges marketing in North-America have often complained that people find trading too complex. Well, innovation (here, exchange SP) was the solution. The Britons –not the Americans– discovered the trick.
- As David Perry (of Consensus Point) and Adam Siegel (of Inkling Markets) know better than I do, MSR (which I view as “simplified trading”) has helped their respective prediction market firms attract a new kind of users —people who are completely new to event derivative trading (and who would not recognize it if this term were spelled out to them).
- Once BetFair SP is up and running, the next logical step would be to take it… offline (where the costly bookmakers are). I foresee BetFair SP booths (with vending machines inside) in the future UK betting landscape.
[...] [*] Overcoming Bias and Freakonomics are not prediction market blogs. And they didn’t take my challenge to comment on the BetFair Starting Prices. [...]