And can you think of a better reason than that?
There is currently some very unusual activity going on in the election markets at
InTrade: Over the past two weeks, there appears to have been a concerted effort
to bid up the price of the contract tied to Hillary winning the Presidency, and
on the back of essentially no news, the price climbed from about 25, up to 40,
and now is at about 35. My usual coauthor, Eric Zitzewitz, suggested that
this looks a lot like manipulation, and the best evidence of this (apart from
the absence of any news) is that over the same period, the odds on Hillary
winning the Democratic nomination are essentially unchanged at 50. It
just can’t make any sense to buy PRES.CLINTON at 40, when
2008DEM.NOM.CLINTON is at 50.
All told though, this manipulator has been
surprisingly successful. And this is where our experiment comes in.
I wonder whether the manipulator will be just as successful when a broader
audience becomes aware of this possibility? We tried a first experiment a
week ago – Eric mentioned this anomaly while at a prediction markets
conference in Palm Desert (Robin was with
us). In turn, this led to a bit of pressure on the price, but the
manipulator held firm. We were wondering whether a simple post on
Marginal Revolution (tipped off by a loyal reader) pointing to this mis-pricing
might lead to further price pressure? As such, if you were to blog on the
mis-pricing, that would serve a second purpose, of giving us truly experimental
variation in public attention. And all of this holds the promise of
learning a bit more about manipulation in prediction markets.
OK people, trade away!