Why don't more businesses use prediction markets? - Marginal REVOLUTION
Tyler Cowenmarginalrevolution.com
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Why don't more businesses use prediction markets? - Marginal REVOLUTION
Saved by King
As a good rule of thumb, proprietary technology must be at least 10 times better than its closest substitute in some important dimension to lead to a real monopolistic advantage. Anything less than an order of magnitude better will probably be perceived as a marginal improvement and will be hard to sell, especially in an already crowded market.
However, as powerful as the theory claims to be, it comes with a few qualifications. The most important is that it pertains to returns on a risk-adjusted basis. Suppose you pursue an investment strategy that entails a 10 percent chance of going broke every year. This is exceptionally foolish—if you followed the strategy over a twenty-year investmen
... See moreEconomics 101 teaches that trading is rational only when it makes both parties better off. A baseball team with two good shortstops but no pitching trades one of them to a team with plenty of good arms but a shortstop who’s batting .190. Or an investor who is getting ready to retire cashes out her stocks and trades them to another investor who is j
... See moreThe equilibrium proposed by Stiglitz is one in which some minimal profits are available to some investors. Efficient-market hypothesis can’t literally be true. Although some studies (like mine of mutual funds on E Trade) seem to provide evidence for Fama’s view that no investor can beat the market at all, others are more equivocal,87 and a few88 id
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