Prediction market analyst Lance Fortnow in an e-mail to me:
Right now the electoral college markets are tracking the polls pretty closely. I think we’-ll see some divergence when we get close to the election since the polls can’-t keep up. In past elections the markets were much better than the polls within a few days before the election (though not on election day itself which has too many rumors).
– There is a long-shot bias —-states which are above 85% (for one candidate or the other) reflect a probability closer to 100%.
– The state markets are strongly correlated. There is a small but non-trivial chance that many states will be way off this year. And then people will be reluctant to trust the electoral college markets in the future.
So, I have (at least) one answer to my series of provocative questions: Electoral college prediction markets are more useful than the state polls towards the very end of the presidential campaign (but not on Election Day). Interesting. Thanks.
PS: The discussion about this post goes on in the comment area of another post.