#1 innovation of the decade = Peer-to-peer wagering
“-In 2000 two men who liked to play card games and make a bet or two created the Ebay of betting –- an exchange where players could bet with each other.”-
InTrade —- US.GOVT.HEALTHPLAN.DEC09
One InTrade trader, in October 2009:
The four re-definitions that have (so far) been necessary during the 3-month life of the US.GOVT.HEALTHPLAN.DEC09 contracts have brought to my attention that Intrade, to the best of my knowledge, does nothing to notify members that contracts they own have been “-clarified”-. It may be coincidence that volume on this contract spiked upward on July 29, Septeber 5 &- 10, and October 9 following rule changes on July 28, September 4 &- 9 and October 9. I suspect, however, that some members were aware of the rule changes while others with open orders found out about them later. While avoiding such ambiguous contracts would be preferable, some system should be in place to ensure that the unexpected need to revise contract definitions does not provide certain members with an unintended advantage.
Among the possible changes that I feel would improve this situation are the following:
1) Post a notification in the “-News”- whenever existing contract definitions are changed.
2) Notify all members with current positions and/or orders in a given contract whenever rule changes are posted.
3) Halt trading for some period of time after each change to allow members equal opportunity to respond to these changes, rather than providing an advantage to anyone who might look back at the contract specs or read their email first, including anyone who might know to look for a change after requesting the clarification from Intrade.
4) Add an asterisk or other indicator beside the contract summary on the trading screen, so that members interested in that contract will know that the contract definition has been changed. Ideally, the date of this revision should be included.
5) Add whatever changes among the above are instituted to Rule 1.7.
Changes 1), 2) and 5) seem like common sense to me, but perhaps others will disagree. In any case, I look forward to other exchange members’- comments on all of these suggestions.
The same trader, in December 2009:
Well, six weeks have passed since Mr. Delaney’-s assurance that this issue would be addressed “-ASAP”-. Unless I have somehow missed being notified of the policy change , it seems clear that the status quo is fine by management.
All I can do to attempt to encourage Intrade to take seriously the ambiguities in certain contracts is:
1) liquidate all my positions in such contracts,
2) avoid trading any potentially ambiguous contracts,
3) attempt to warn other traders about contracts that may be potentially ambiguous.
In particular, I will certainly stay away from any contracts involving U.S. legislation.
I could instead try to anticipate specific improvements that would help minimize ambiguities. However, if Intrade management cannot be bothered to address this issue even in a broad way, I think that it would be counterproductive for me to apply the occasional Band-aid. Discouraging other traders from becoming entangled seems more productive.
Emile Servan-Schreiber comments on a New York Times opinion piece:
The idea that betting could help us gain clarity on some controversial scientific questions has first been proposed by George Mason economics professor Robin Hanson in 1992 in a paper entitled “-Could Gambling Save Science”- and available online here: http://hanson.gmu.edu/gamble.html
The benefits of creating prediction markets about controversial climate-change issues in particular is further developed on Nate Silver’-s blog and in this presentation given at CalTech in 2004: http://us.newsfutures.com/home/environmentalFutures.html
John Stossel (spot the intro where he says he loves InTrade):
Nate Silver’-s prediction (November 2, 2009): “-I’-d make Christie about the 4:3 favorite.”-
[ UPDATE: Nate Silver’s prediction post-mortem on the 2009 US elections.]
You can see that days before Elections 2009, InTrade was too heavy on Corzine:
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Formula One’-s Abu Dhabi Grand Prix in Yas Marina Circuit, Abu Dhabi, United Arab Emirates:
BetFair’-s favorite is Lewis Hamilton on McLaren-Mercedes.
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Bonus Track 
Ferrari World –- Ferrari theme park @ Abu Dhabi
UPDATE: FAIL.
The Chicago candidacy, which was favored by the prediction markets (and gullible bettors like Ben Shannon), is the one that fared the worst.
As we have blogged here many times, not every prediction market is created equal. Some are bound to aggregate bits of known information. Some others (e.g., the Olympic city prediction markets) are not able to do that, because no good information is leaking out. The IOC is a close aristocratic group that does not leak out good information. Those who forgot that and bet the farm on Chicago are now licking their wounds. You need an information analyst to assess whether a particular prediction market is pertinent.
– BetFair’-s event derivative prices:
– InTrade’-s event derivative prices:
– HubDub’-s event derivative prices:
The Chicago candidacy, which was favored by the prediction markets (and bettors like Ben Shannon), is the one that fared the worst.
– “-Will Chicago get the Olympics? Dona€™t bet on it. Too risky.“-
– The prediction markets are not able to forecast which country will get the Olympics. The IOC is a close aristocratic group that does not leak information. Hence, it is not possible to aggregate information.
– Once again, Ben Shannon made a very bad bet. He should read Midas Oracle more often —-if he wants to avoid personal bankruptcy.
– Once again, we see that the P.R. agents of InTrade and BetFair (who both bragged about being able to predict Chicago) were overselling.
– BetFair’-s event derivative prices (on the far right of the chart, you can see that the price went down to zero):
– InTrade’-s event derivative prices (on the far right of the chart, you can see that the price went down to zero):
– HubDub’-s event derivative prices:
