Robin Hanson is schooled about prediction market trading.
Our guest author to our Master Of All Universes:
Feedback trading just means the kind of momentum trading that is pervasive in traditional assets, again, less so in prediction markets. In the biastest experiment, traders were given formal “-clues”- about the settlement, but for many market participants, the best “-clue”- (even rationally, if lazy) is recent price action. Even if feedback trading was possible within the experiment, the outcome (manipulation attempts were corrected) suggests that it wasn’-t prevalent.
In this experiment, traders were given equal endowments of shares/currency…- i.e. initially had equal account sizes. Yes, there were an equal number of manipulators and non-manipulators, but they could not coordinate. Even if they were implicitly coordinating, this is not the same as a single large trader influencing the market. Yes, in the theory paper trading sizes were variable, but according to the same parameter for each trader. Maybe if there were a large supply of potential traders able to frictionlessly join the manipulated market, a manipulator’-s relatively deep pockets wouldn’-t matter.