Monthly Archives: February 2008

Super Tuesday = Free money, if you are smarter than the crowd

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At Overcoming Bias, Eliezer Yudkowsky invites pundits, partisans, and anyone else with a nascent opinion about the limits of prediction markets to, in effect, put up or shut up. (Though he puts it in somewhat nicer words). Here is a selection, but read the whole thing:

If you think that Hillary is going to do better than the polls on Super Tuesday, and you&#8217-re going to sneer afterward and say that Intrade was &#8220-just tracking the polls&#8221-, buy Hillary now.

If you think that Obama is going to do better than the polls on Super Tuesday, and you&#8217-re going to gloat about how prediction markets didn&#8217-t call this surprise in advance, buy Obama now.

&#8230-

The point is not that prediction markets are a good predictor but that they are the best predictor. &#8230- If prediction markets react to polls, they&#8217-re getting new information, that they didn&#8217-t predict in advance, which happens. Being the best predictor doesn&#8217-t make you omniscient.

Everyone&#8217-s going to find it real easy to make a better prediction afterward, but if you think you can call it in advance, there&#8217-s FREE MONEY GOING NOW.

Buy now, or forever hold your peace.

Super Tuesday Showdown: Intrade v. Zogby

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Up at Caveat Bettor.

Zogby poll numbers here. Intrade snapshots taken at 1pm. Here are the notable divergences between the pollster and the prediction market:

NJ Dem: Intrade calling for Clinton, while Zogby in a tie.

CA Rep: Intrade calling for McCain, while Zogby calling for Romney.

Standings&nbsp-&nbsp-&nbsp-
WinsLossesTiesPctContender
&nbsp-&nbsp-&nbsp-&nbsp-&nbsp-
3240.556Intrade
2340.444Zogby
Schedule&nbsp-&nbsp-&nbsp-&nbsp-&nbsp-&nbsp-
ScoreDate&nbsp-StatePartyIntradeZogbyWinner
&nbsp-&nbsp-&nbsp-&nbsp-&nbsp-&nbsp-&nbsp-&nbsp-
3-2-429-Jan&nbsp-FLRepMcCain2-way-tieMcCain
2-2-426-Jan&nbsp-SCDemObamaObamaObama
2-2-319-Jan&nbsp-SCRepMcCainMcCainMcCain
2-2-219-Jan&nbsp-NVDemObamaClintonClinton
2-1-215-Jan&nbsp-MIRepMcCain2-way tieRomney
2-0-28-Jan&nbsp-NHDemObamaObamaClinton
2-0-18-Jan&nbsp-NHRepMcCainMcCainMcCain
2-0-03-Jan&nbsp-IADemObama3-way tieObama
1-0-03-Jan&nbsp-IARepHuckabee2-way tieHuckabee

Seems to me that the TradeSports market was reflecting what was happening on the field, rather than predicting it.

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Exactly. :-D

See the fist comment, there.

Read the previous blog posts by Chris. F. Masse:

  • Five reasons Hillary Clinton should be worried
  • TURNING POINT: BARACK OBAMA EVENT DERIVATIVE NOW AHEAD
  • The Best External Web Links On Prediction Markets And On Everything Else
  • The InTrade webmaster is a moron.
  • The Economist rebuts Paul Krugman.
  • The US futures exchanges should not control clearing.
  • Billionaire Stephen Schwarzman: “I don’t feel like a wealthy person.”

Merger Markets on Microsoft-Yahoo

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HP began to explore prediction markets in 1996, but did not even consider applying them to the 2002 HP-Compaq merger. Similarly, Yahoo and Microsoft are two of the companies mentioned most often as being involved in prediction markets (along with their main competitor Google), but I&#8217-ll bet none are considering the by-far-most-valuable markets they could create, on their just-announced proposed merger.

Decision markets could say whether this merger is good for shareholders, by estimating the combined stock price given a merger, and given no merger. Similarly, decision markets could say whether this merger is good for these firms&#8217- customers, by estimating the price and/or quantity of web ads given a merger, and given no merger. This might help convince regulators to approve the merger.

My main doubt here is whether ad price and quantity are good enough measures of the merger&#8217-s social benefits – what other outcomes could such markets estimate, to speak more clearly? And this is a very clear demonstration that these companies are just not serious about finding the highest value applications of prediction markets.

Cross-posted from Overcoming Bias.