The NYT writers discusses 2 (different?) issues.
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#1. There was market arbitrage opportunies in the recent past between InTrade and BetFair —-unlike 4 years ago, and contrary to the laws of economics.
– The price of the Barack Obama event derivative was cheaper on InTrade than on BetFair and the Iowa Electronic Markets. Conversely, the price of the John McCain event derivative was more expensive on InTrade than on BetFair and the Iowa Electronic Markets.
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#2. The NYT writer reports (without linking to it) the findings of the InTrade investigation about the behavior of their unnamed “-institutional investor”-.
– InTrade CEO John Delaney suggests that that institutional investor:
- might operate on InTrade at specific times where it might not be able to find liquidity on BetFair and/or IEM-
- might be a bookmaker willing to hedge its risks on a prediction exchange (a.k.a. betting exchange).
– Justin Wolfers’- PHD student remarks that that institutional investor is not making an effort to shop around for the best prices, within each InTrade political prediction market.
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RELATED: See the comments on Midas Oracle here, here, here, and here.
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