Comment on "I don't know."

Fri, 22 Jun 2012 05:28:04 GMT

There's no rational reason to do this. If you think that X has more than a 25% chance of being true given that the market is at 25%, you'd buy at 25%. If you think it has less than a 25% chance of being true, you'd sell at 25%.

Risk aversion and transaction costs are both real and reasonable things. If I think there's a 25% chance of X, and someone else thinks there's a 24% chance of X, it's not worthwhile for us to bet on whether or not X will be true, because there's so little money on the table and so much variability in whether or not X will happen.

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