Betting markets in everything

by on August 10, 2010 at 1:34 pm in Economics, Education | Permalink

Think you're going to ace freshman year? Want to put money on that?

A website called Ultrinsic is taking wagers on grades from students at 36 colleges nationwide starting this month.

Just as Las Vegas sports books set odds on football games, Ultrinsic will pay you top dollar for A's, a little less for the more likely outcome of a B average or better, and so on. You can also wager you'll fail a class by buying what Ultrinsic calls "grade insurance."

CEO Steven Wolf insists this is not online gambling, which is technically illegal in the United States, because wagers with Ultrinsic involve skill.

Student users claim it motivates them to work harder.  Here is the full story, here is another.  Here is an Andrew Gelman post.

How do they avoid adverse selection?  Is it that they lure failing fools, who think that money will make such a difference?

For the pointer I thank Max Levine, a loyal MR reader.

1 Careless August 10, 2010 at 1:54 pm

Damn, do I wish they had this when my wife started college here. Would have been the easiest money ever.

2 Anastasia August 10, 2010 at 2:11 pm

Wouldn’t the “grade insurance” actually give you incentive to not work hard at all? Especially if it ends up being substantial enough to even out the cost of taking a class altogether. Wouldn’t a person willing to buy the “grade insurance” be more likely to need it and therefore end up calling on it? I don’t see how the betting can work out.

This is so silly and can’t possibly last long.

3 philosophking August 10, 2010 at 2:27 pm

I predict this will create something of an “achievement value bubble”.

….Oops, I guess that already popped.

4 Brent August 10, 2010 at 4:00 pm

Could be an interesting study on Illusory superiority.

5 chris August 10, 2010 at 5:10 pm

How do they avoid adverse selection?

My guess would be that Dunning-Kruger is bigger than adverse selection for the regular bets. So there is information asymmetry, but the student is actually *worse* informed because they’re misinformed by D-K. The few students who accurately know that they’re going to make As get offered poor odds (because they have made lots of As before) so they don’t affect overall profitability much.

Dunno about the reverse bets though, unless the insurance is in a small enough amount that it can’t ever really pay to deliberately bomb your classes for the insurance money. (But maybe if your parents are paying your tuition and they don’t know about the insurance deal…)

6 mravery August 10, 2010 at 6:02 pm

What does doing well in your classes have to do with getting a job?

7 stinky August 10, 2010 at 7:58 pm

mravery: Presumably the whole point of taking a class is so that you will learn something useful. Furthermore, you are graded on how well you have learned the useful thing, so that employers can know how useful you are. If this seems alien to you, you may have chosen the wrong major.

8 search engine position August 11, 2010 at 3:00 am

These is one of the great post which you can share is really nice. CEO Steven Wolf insists this is not online gambling, which is technically illegal in the United States, because wagers with Ultrinsic involve skill.

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