The money brought in by stupid gamblers creates additional incentive for smart players to clear it out with correct predictions. The crazier the prediction market, the more reason for rational players to make it rational.
The money brought in by stupid gamblers creates additional incentive for smart players to clear it out with correct predictions. The crazier the prediction market, the more reason for rational players to make it rational.
Right. Maybe I shouldn't have said that a prediction market would be "predictably inefficient". I can see that rational players can swoop in and profit from irrational players.
But that's not what I was trying to get at with "predictably inefficient". What I meant was this:
Suppose that you know next to nothing abou...
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July Part 1