Recursive prediction markets

by phil on Friday May 21, 2010 2:18 AM
philosophy

Intrade lets you bet money on the probability of current events, like whether a certain candidate gets elected President. Apparently their prediction market is the most accurate thing out there, which leads to interesting experiences while interpreting the data.

For example, during the 2008 presidential campaign, in the weeks leading up to Election Day, the odds were around 90% that Obama would win. But then I wondered whether those odds included the effect that those odds would have on Obama's confidence. Even if Obama didn't read Intrade, there must have been some positive sentiment floating in the air (from an admixture of polling and political analysis) that could have adversely triggered his hubris. But would those risks be factored into those odds? And if that lowered the odds, would that then also affect his confidence?