Something’s Odd About the Political Betting Markets
But more recently, prediction markets have developed an odd sort of problem. There seems to be a feedback mechanism now whereby the betting-market odds reify themselves.
What do we mean by that? In the case of Brexit, it goes like this: Different surveys give different results, and we all know not to trust the polls, which have notoriously failed in... See more
What do we mean by that? In the case of Brexit, it goes like this: Different surveys give different results, and we all know not to trust the polls, which have notoriously failed in... See more
David Rothschild • Something’s Odd About the Political Betting Markets
People don’t feed information back in the system since they assume that is the outcome. The direction is wrong. Not using own data to predict and then buying based on that (which feeds the system). Instead assuming that is the right odds and not changing it
Prediction markets work because traders can see all of the standard forecast data and aggregate it along with other idiosyncratic or dispersed information about the election. Traders can aggregate polling data or follow published poll aggregates, and they can add in any other information they think is relevant.
David Rothschild • Something’s Odd About the Political Betting Markets
As researchers in political science and as economists, we see three enticing advantages of forecasts from prediction markets, compared with poll-based forecasts of election outcomes: 1) Markets have full coverage of outcomes. They covered all primaries and caucuses in 2016, when polls covered about 50 percent of possible contests. Similarly, for Br... See more