Prediction markets as bribery?

by on January 25, 2008 at 4:09 pm in Political Science | Permalink

Harald, a loyal MR reader, writes to me:

What would happen if some famous rich person walked into a presidential prediction market and said: "Hello, I’m selling shorts for candidate A, to the value of a hundred million dollars if he should win. I’m not doing this because I don’t believe candidate A will win, indeed, I want her to win. I hope everyone who can help candidate A win, by campaigning, talking to friends, or even just voting, will buy a short from me (I’m practically giving them away!) and go out and do it with a healthy economic self-interest in their hearts!"

Regulators aside, could such a scheme work?  It is best done as a contingent claims market, rather than in the InTrade format.  You buy insurance for a penny, and you get a payout of a thousand dollars if candidate X wins.  Claim holders may then support and talk up candidate X.  Of course people who won’t change their votes for a thousand dollars also will try to buy up the contingent claims.  So the sponsor might restrict purchases to people who live in swing states or who can prove independent voting affiliation or an absence of previous campaign donations [TC: I’ve edited this section a bit for clarity]. 

How about giving away assets that pay off if some important social problem is solved?  How much would it cost to mobilize a strong enough army of voters to oppose farm subsidies?   

1 Anonymous January 25, 2008 at 4:47 pm

If you sell 1000 shorts really cheaply, what’s to stop one person from buying all 1000? There’s no way to enforce a limit of “one per customer”, and thus no way to incentivize a thousand people to vote for your candidate.

A secondary issue is that prediction markets are just too thinly traded at the moment. Only a vanishingly tiny fraction of the population has even heard of them.

2 8 January 25, 2008 at 5:53 pm

The same can be done by abolishing departments and sending the money back as tax “rebates”.

3 Cormac January 25, 2008 at 7:02 pm

On the subject of price, in Thailand the cash price of a vote is 500 baht, around 12usd. US GDP per capita is only a few multiple of Thai. So $1000 sounds unnecessarily high.

Remember you don’t need to bribe the average voter, only the poorest ones. Of course it might be that those ones don’t understand prediction markets.

4 enrique January 25, 2008 at 10:15 pm

I don’t see a problem here, nor any need for any regulators, because if you buy x amount of futures for candidate X, someone else can buy y amount for candiate Y — in the end, the transactions on both sides will cancel out and an equilibrium will be reached

5 anonymous January 26, 2008 at 3:34 am

This post was incomprehensible. And I have a PhD in economics.

6 George Weinberg January 26, 2008 at 1:51 pm

It wouldn’t work because one’s individual vote has such a small impact. Let’s say you will pay me $10,000 if your candidate wins, and my vote has a 1 in $10,000,000 chance of deciding the election. My voting for your candidate gives me an expected yield of a tenth of a cent.

Maybe with a sufficiently large bribe you can get yourself elected dog catcher.

7 Allison January 28, 2008 at 10:51 pm

I suppose the idea of bribery to get one’s desire to vote for a candidate would initially sound quite difficult and unethical. In such a case, the amount of money may not be the subject in question. When initiative is one’s aim, the cause may need a little boost of “confidence.† The goal is to get one’s ideas across and aggregate important points to display a probable cause and throw in a little “initiative.† To simply suggest any amount of money into such a program without detail is suicide.
Therefore, one must display a cause with extensive research and supply a donor that shares the same amount of interest. The public is then shown a dedication through donation and hard facts. The idea is to display any large amount not as any amount, but as a resource. This resource may provide land, labor, capital, and entrepreneurship. As an example, one must demonstrate a structured influence on what is a present problem. With proper supplies and more research, any product used to help improve technology could provide more jobs. A large donation can easily accomplish it.
With such a positive outcome, the public would look at the proposed amount and maybe even add to it. Along with proposed investments, the public will see the goal and know how to obtain it. A large amount of money may very well significantly increase the individual’s support from the public If properly displayed. The dedication of an individual with such economic stance provides the confidence that should be put into a particular campaign. The rhetoric could provide a subtle, but hefty push into public popularity.

8 二宮沙樹 July 28, 2008 at 7:28 am

Very nice article! Thanks for this!

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