Eric Zitzewitz’s post, circa November 2007.

This contract will settle (expire) at 100 ($10.00) if BOTH of the following events occur before 11:59:59pm ET on the date specified in the contract:

1. Osama Bin Laden is captured or neutralised
2. President Pervez Musharraf departs as president of Pakistan

The contract will settle (expire) at 0 ($0.00) if BOTH of these events DO NOT occur before 11:59:59pm ET on the date specified in the contract.

Osama Bin Laden:

Expiry will be based on official US Government announcements confirming the capture or neutralisation (which includes, but is not limited to, death) of Osama Bin Laden, as reported in three independent and reliable media sources.

Expiry will be based on information made public at that time. Any information regarding capture or neutralisation that becomes public after a contract is expired will not affect the original expiry.

President Musfarraf:

A departure includes (but is not limited to):

- Resignation
- Retirement
- Removal by electoral process (i.e. voted out of power in an election)
- Removal by coup d’etat
- Removal by constitutional process (e.g. impeachment)

These contracts do not cover the death of President Musfarraf. In the event of the President Musfarraf’s death before expiry the contract will be unwound, all trades reversed and all trading fees refunded

A resignation or retirement does not have to result in the actual departure by the contract expiry date but rather the announcement of the resignation or retirement must be made and not rejected by that time/date.

A tendered resignation that is not accepted will cause the contract to expire at 0 [*]

A departure may be ‘forced’ or ‘voluntary’.

Expiry will be based on official, public announcements as reported and verified in three independent and reliable media sources.

Due to the nature of this contract please also see Contract Rule 1.7 Unforeseen Circumstances.

The Exchange reserves the right to invoke Contract Rule 1.8 (Time Protection) if deemed appropriate.

Any changes to the result after the contract has expired will not be taken into account – Exchange Rule 1.4

Please contact the exchange by emailing help@intrade.com if you have any questions regarding this contract before you place a trade.

Important:
Please contact the Exchange if you have any query or uncertainty (including how it may be settled) about this Contract, the Rule above or the Contract Rules before you trade.

[*] Have you seen that line?? I bet they added that because they realized that they made a mistake with the Larry Craig prediction market.

Previously: If Musharraf goes, should we celebrate? – by Eric Zitzewitz (who suggested this set of prediction markets)

But would Musharraf’s fall be good news? It’s not obvious, since we don’t know who will replace him (i.e., Bhutto or someone more anti-Western). And even if it’s Bhutto, we don’t know how much help she’ll be once in office.

Intrade has just listed a contract that may help provide an answer. In addition to adding Musharraf to their foreign leader departure series (as Chris noted yesterday), they also added a parlay for Musharraf leaving and Osama being captured (at my suggestion). So if these contracts turn out to be liquid, we’ll be able to get a market-based estimate of the correlation between Musharraf and a reasonable summary statistic for whether outcomes in Pakistan are good for the West.

Of course, the usual caution about correlation and causality applies here. If Osama is caught tomorrow, it probably helps Musharraf keep his job. The longer term conditional probabilities should be less contaminated by this problem and the difference betweens between the prices of the long and short dated contracts might be used to contract a clean(er) estimate of a causal effect.

This seems like the most interesting geopolitical decision market to come along in a little while. But it’ll only work if it’s liquid. So those of you with Intrade accounts, put up an order or two. Your country needs you.