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gwern comments on Open Thread, January 4-10, 2016 - Less Wrong
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Is there a formal theory of how a rational actor should bet on prediction markets? If the prediction market says the probability is 70% and the actor thinks it's 60% is there a formal way to think about to what extend the agent thinks he knows better and should therefore bet against the market?
I'd guess that that falls under the usual paradigms like Savage or Von Neumann-Morgenstern. For example, the Kelly criterion.