Combinatorial Information Market Design
Information Systems Frontiers
Non-myopic strategies in prediction markets
Proceedings of the 9th ACM conference on Electronic commerce
Information aggregation in dynamic markets with strategic traders
Proceedings of the 10th ACM conference on Electronic commerce
A unified framework for dynamic pari-mutuel information market design
Proceedings of the 10th ACM conference on Electronic commerce
Bluffing and strategic reticence in prediction markets
WINE'07 Proceedings of the 3rd international conference on Internet and network economics
A multi-agent prediction market based on partially observable stochastic game
Proceedings of the 13th International Conference on Electronic Commerce
What you jointly know determines how you act: strategic interactions in prediction markets
Proceedings of the fourteenth ACM conference on Electronic commerce
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Recent years have seen extensive investigation of the information aggregation properties of prediction markets. However, relatively little is known about conditions under which a market will aggregate the private information of rational risk averse traders who optimize their portfolios over time; in particular, what features of a market encourage traders to ultimately reveal their private information through trades? We consider a market model involving finitely many informed risk-averse traders interacting with a market maker. Our main result identifies a basic asymptotic smoothness condition on the price in the market that ensures information will be aggregated under a portfolio convergence assumption. Asymptotic smoothness is fairly mild: it requires that, eventually, infinitesimal purchases or sales should see the same per unit price. Notably, we demonstrate that, under some mild conditions, cost function market makers (or, equivalently, market makers based on market scoring rules) satisfy the asymptotic smoothness requirement.