Interpreting Prediction Market Prices as Probabilities
Abstract
While most empirical analysis of prediction markets treats prices of binary options as predictions of the probability of future events, Manski (2004) has recently argued that there is little existing theory supporting this practice. We provide relevant analytic foundations, describing sufficient conditions under which prediction markets prices correspond with mean beliefs. Beyond these specific sufficient conditions, we show that for a broad...
Paper Details
Title
Interpreting Prediction Market Prices as Probabilities
Published Date
Jan 1, 2006
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