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If all one cares about is the accuracy of predictions (i.e. setting aside value judgements vis-a-vis society or fairness), it does seem like "insider trading" s
by chao- 6mo ago
If all one cares about is the accuracy of predictions (i.e. setting aside value judgements vis-a-vis society or fairness), it does seem like "insider trading" should make prediction markets more accurate.
- notahacker 6mo agoIt makes them more accurate at the time the insider places the bet. But to maximise profit, they are incentivised to misdirect before they place the bet (and worse still from society's perspective, are incentivised to take counter-intuitive or downright harmful actions to profit at the expense of people who bet on the view that it made no sense for them to do that)
- tptacek 6mo agoHow does this trade work? Nobody knows who the insider is, they only see market direction.
- notahacker 6mo agoYou are a spokesperson or decision maker for an entity which is bet on, like a sports team or the government. You publicly indicate that you are going to do one thing (probably the thing that makes most sense), so the market bakes that into their assumptions and offers favourable odds for bets on doing the other thing. Then you place your bet shortly before you do the other thing. (it's true that low level insiders might have limited influence on the actual outcome, but the current suspicion with prediction markets is that some of the participants do have that influence, or are being intentionally helped by people that can)
- mbesto 6mo agoThis gets into game theory and doesn't follow a predetermined flow like you're suggesting. It's a bit like playing poker...does the guy who just went all in have pocket Aces or not?
- foltik 6mo agoIt’s not really a game when one player gets to decide the outcome. In poker, the guy who went all in can’t peek at your cards and swap out his hand at the last second.
- mbesto 6mo ago[dead]
- notahacker 6mo agoIt really isn't at all like poker and really is a lot like the predetermined flow I'm just describing. Prediction markets regard the actions of politicians, sportspeople or businesspeople as indications of their wider goals for the country/team/business, not bluffs to try to influence their betting action. If a company says they're planning to IPO this year, everybody reasonably assumes that means the board want to make the IPO happen, not that they've already decided against it but reckon they can make a decent amount of spare cash anonymously betting against it happening on Polymarket