Beta
×

Welcome to the Slashdot Beta site -- learn more here. Use the link in the footer or click here to return to the Classic version of Slashdot.

Thank you!

Before you choose to head back to the Classic look of the site, we'd appreciate it if you share your thoughts on the Beta; your feedback is what drives our ongoing development.

Beta is different and we value you taking the time to try it out. Please take a look at the changes we've made in Beta and  learn more about it. Thanks for reading, and for making the site better!

How To Stop Prediction Market Manipulation

timothy posted about a year and a half ago | from the bet-you-can't-do-it dept.

The Almighty Buck 129

Frequent contributor Bennett Haselton is still thinking about prediction markets, and giving away money. He writes: "In an article last December I described a problem with prediction markets, where even markets with cap on betting limits could be manipulated by a single trader willing to spend a lot of money to distort the marketplace odds. So I offered a $100 cash prize to be split between readers who collectively came up with the best solution to the problem. Here's an idea that I think would work." Read on for the rest.

In November I wrote an article arguing that prediction markets like Intrade -- where users can bet on the odds of, say, Obama or Romney becoming president -- were a useful tool for aggregating the wisdom of crowds, but could be manipulated by someone placing a large bet in order to create the illusion that "the markets" were favoring their candidate. If the fake "market odds" were reported in the news, it could have the effect of causing more supporters to switch to that candidate, thus increasing the true odds of their victory and creating a self-fulfilling prophecy before the markets had the chance to correct themselves. The solution, I thought at first, was to have a cap on the amount that individual users could bet (which is one of the rules at the Iowa Electronic Markets), and make it illegal for a single mastermind to pay large numbers of third parties to make bets in order to circumvent the single-bettor limit.

As I admitted in a follow-up article, it turns out this regulation would not work after all. The problem is that as long as long as overseas betting markets like Intrade have no limit on wagers, a market manipulator could place a huge bet on Intrade to cause the odds to shift on that market -- for example, changing the odds of Obama-to-win from 4:1 to 6:1. Meanwhile, the odds in a domestic prediction market with a betting limit -- call it CappedEx -- would initially stay at their non-manipulated value of 4:1. But then "arbitrage players" could spot the difference in the odds being offered, and make opposing bets in the two markets in a way that would be guaranteed to make a net profit. (The details are spelled out in my last article, but basically, any time two markets are offering different odds of an event happening, you can pick appropriate amounts to bet in the two markets so that you're guaranteed a profit whether the event occurs or not.) These arbitrage players would continue making opposing bets in the two markets until the odds being offered in the two markets converged onto the same value -- at which point, the market manipulator has successfully manipulated the odds in the capped market, even without ever placing a bet there. Essentially, the market manipulator has hired all of those arbitrage players and paid them to make bets on his behalf, but done so indirectly to avoid violating laws against hiring an army of bet-placers.

I should be clear about the two different time frames being discussed here. If a manipulator places a large bet on Intrade, causing the odds on Intrade to diverse significantly from the odds on CappedEx, then the arbitrage players should cause the odds on the two markets to converge to the same value very rapidly -- plausibly in less than one minute. (Whoever spots the difference first, gets guaranteed free money. It would be easy to write a bot that could watch for any divergence in the odds in the two markets, and place guaranteed-profit bets as soon as a gap appeared.) Then, as political observers noticed that the odds have shifted (without any real-world event in the news that could plausibly explain the shift), another wave of bettors would take advantage of the distorted odds, to bet on the side of the event whose odds had been artificially lowered by the market manipulation. (The odds favor making such a bet, although it's not as good as a guaranteed profit.) As enough people made these opportunistic bets, the market odds would correct themselves to their original values. However, this second wave of betting would probably take a few hours, because it requires humans to think critically about the events. (One likely case of manipulation managed to shift the odds for a few minutes for just $20,000, so it's not unreasonable to think that a million dollars or two -- still small change by the standards of presidential candidates, especially when it's not subject to spending limits -- could distort the market for several hours.) The danger is that the market manipulation could cause the odds to shift in the capped market almost instantly, but the market correction would not take place until several hours later, and in that time the damage (in altering people's perceptions, and possibly creating a self-fulfilling prophecy) would already be done.

It didn't seem like there was any obvious solution to this problem. The U.S. government could ban its citizens from betting on foreign uncapped markets, but it would be too easy for a U.S. citizen to coordinate with an overseas partner to place the arbitrage bets together and split the profits. Or the U.S. could try to ban prediction markets entirely (capped or uncapped), but many economists argue that they're a useful tool for assessing the wisdom of crowds to assess the odds of an event. You could ban media reporting on the odds given by prediction markets (to try and avoid the self-fulfilling-prophecy problem), but that would probably be unconstitutional in the U.S., and unenforceable anyway if people could get their news from overseas.

So in my last article I offered up to $100 to be split between readers who came up with the best arguments for how to stop prediction markets, even markets with individual betting limits, from being shifted by manipulators who place large bets on foreign markets and then count on arbitrage players to pass on the effects to the capped markets. (I've offered cash prizes to readers who submit winning ideas before, and it usually doesn't take this long to get to the follow-up and pay out the prizes. Some follow-up articles that I submitted got lost in the editors' spam filters, sigh, and then there were some other articles in the pipeline that had to go out first. If I offer prize money for ideas and you submit a winning idea, normally you'll get your money much faster.)

Before reading any further, you might want to stop and try to think of what you would consider to be the best solution to this problem (even if the prize money has already been allocated), and then compare it to what we came up with.

... And, welcome back. Here's what I think is the best answer so far: For each event that the capped markets allow users to bet on, the capped market should also be required to monitor the odds that any overseas uncapped markets are offering on the same event. Then if there has been any recent time period where the odds on the overseas markets differed significantly from the odds on the domestic market (significantly enough to indicate manipulation -- and, similarly, significantly enough that the difference probably motivated arbitrage players to place bets to close the gap), then the reported odds should appear with a disclaimer saying, "There was a recent divergence in the odds on capped vs. uncapped markets, so the odds displayed here may have been manipulated, and should be regarded skeptically." This would help to avoid the self-fulfilling prophecy problem, if people are less likely to regard the manipulated odds as a reflection of reality.

The key assumption here is that if a real-world event happens that changes the probability of, say, an Obama victory, then the market odds in both the capped and uncapped markets should shift at about the same time to reflect that new probability. On the other hand, if the odds have shifted significantly in only one of those markets, that could be taken as a sign that that market was being manipulated. Arbitrage players would still be free to make opposing bets in the two markets to narrow the gap, so the odds in both the capped and uncapped marketplaces would still change in the short term, but in the regulated capped market, the odds would be reported with a disclaimer that they're not reliable. After a few more hours, opportunistic bettors would make bets taking advantage of the distorted odds, and the market would correct itself.

This idea did not come from any particular reader but came up as the result of the back-and-forth I had with several people.

A few readers also had interesting ideas for regulations that could fix the problem if they could be applied to all markets. For example, Nathan Dykman suggested that in order to wager larger amounts, you would have to wager that your candidate would win by a larger margin (e.g. if you can bet $1,000 that Romney would win by 1 million votes or more, or you could bet $10,000 that Romney would win by 10 million votes or more -- so that large "manipulative" bets would stand out more obviously). Andy Jobe suggested "staggering" bets so that high rollers could only bet large amounts by placing lots of small bets in sequence, paced slowly enough that the market would probably detect the manipulation attempt and start correcting for it, before all of your bets went through. Jonathan Pearson suggested mandating that markets report the number of people making particular bets as well as the market odds, so that single large manipulative bets could be easily spotted. Ben Griffin suggested simply requiring disclosure of large bets by certain people (as he put it, the headline "Saudi Prince believes that Romney will win the election. What does he know that we don't?!" contains more useful information than "Romney's odds of victory looking better at Intrade").

I think these points are all correct, but the problem with all of these ideas is that they only work if all of the relevant markets are regulated. And if you allow that assumption, then the problem becomes trivial -- because you can just require an individual betting cap in all of the markets. On the other hand, if there's at least one market anywhere in the world that is beyond the reach of your regulations, then they don't have to disclose any statistics about their bettors or follow any other rules that you make. Then when a manipulator places a large bet in that unregulated market, when the arbitrage players place their many small corresponding bets in your domestic regulated market, the detection mechanisms described above, won't do anything to stop that -- those bets in your regulated market look like real bets because they are real bets.

By contrast, if you require domestic capped markets to monitor the overseas uncapped markets, and disclose if the uncapped odds have diverged recently from the capped odds, this still works even if the regulations only apply to your domestic capped market. People can still place manipulative bets on foreign markets, but if the media reports the current "market odds" by looking at the capped market, those odds will be harder to manipulate without getting caught, because they'll run a disclaimer if manipulation has been detected recently. (Of course if the media gets their "odds" from the overseas uncapped market, and reports those odds as literal truth even when the domestic capped markets are running a disclaimer saying that those same odds have recently been manipulated, we can't do anything about that. The hope is that news agencies, no matter how lazy they may be, will at least choose to report accurate information if it takes the same effort as reporting inaccurate information, and thus would prefer getting their information from the domestic capped market, where they can easily check if there's a disclaimer saying the odds have been manipulated recently.)

Some interesting points made by other readers:

  • Carl Pearson mentioned that if campaigns had to start diverting attention to prediction market manipulation in addition to all of their other business, this might hurt small third-party candidates more than big campaigns -- because smaller campaigns have fewer available resources to put towards handling new kinds of problems. (True, I think, but only if the markets can be manipulated. If they can't be manipulated, and they're just a barometer of what people are thinking will happen, then you don't need to waste campaign time fighting on that front.)

  • Michael Mendenhall pointed out that even in a capped market, the cap should be high enough to create a high "signal-to-noise" ratio. If the cap is too low, the market odds will reflect the betting of more uninformed people who use the betting as a low-cost opportunity to cheer for what they think should happen instead of what they think will happen. (On the other hand, if the cap is too high, then the market is too easily to manipulate.)

  • Marc Beaupré argued that prediction markets can probably never be stamped out anyway, because anonymous payment protocols like Bitcoin make it possible for crypto-anarchists to place best on unregulated darknets where they can ignore caps and disclosure requirements all they want. I'm not sure that's true (how do you place a bet in an anonymous peer-to-peer market -- who enforces the payment from the loser to the winner, depending on the outcome?) but it actually doesn't change the main thrust of my argument -- you can still have a regulated, capped domestic market, which is where the media could go for accurate information about the current market odds. So a manipulator could throw their Bitcoin money away on an unregulated peer-to-peer betting network, but it wouldn't do them any good.

Splitting the $100 in prize money, all 7 of the readers credited here get $15. There may be a simpler idea that we missed, or a different reason why this proposed idea would not work. Either way, I'm always grateful for the high quality of the comments that get emailed to me as part of these contests. Eventually I'd like to run some article contests for people to email ideas for a follow-up article, but without offering prize money, to see if that affects the quality of the submissions. It would be impossible to run a precisely controlled experiment (because you can't write a single article where half of your readers are eligible to submit ideas for prize money, and the other half are expected to submit ideas for free), but if we run contests for a large number of articles, and about half of those contests involve cash prizes while the other half offer only acknowledgement, it should eventually become clear if there's a difference in the quality of submissions. It may be that, unlike prediction markets, idea-improvement contests work just as well when there's no money involved.

cancel ×

129 comments

Sorry! There are no comments related to the filter you selected.

Iowa Electronic Market goofed up (1)

Anonymous Coward | about a year and a half ago | (#42821881)

This is a little off-topic, but it looks like the Iowa Electronic Market did unexpectedly poorly with the election this year.

See http://www.pollyvote.com/

"The task of predicting U.S. presidential elections is ideal for demonstrating the usefulness of combining forecasts, as there are a number of different methods that use different sources of information, or process it differently. In addition, it is difficult to judge a priori which component forecast is likely to be most accurate at different times in a campaign. The historical track record of single models or methods is usually of little help. A prominent example of this year’s campaign is the Iowa Electronic Vote Share Market (IEM), which provided the most accurate component forecasts in past elections (Graefe et al., 2012). This time, the IEM was among the least accurate of Polly’s constituent forecasts, except for its Election Eve forecasts."

Re:Iowa Electronic Market goofed up (2)

AVee (557523) | about a year and a half ago | (#42824241)

Honestly, I can't make anything out of this stuff. If we want to know the outcome of elections, can't we just count the votes? And if we want to loose money placing bets can't we just bet on sports games or buy lottery tickets?

Re:Iowa Electronic Market goofed up (1)

khallow (566160) | about a year and a half ago | (#42824855)

If we want to know the outcome of elections, can't we just count the votes?

Because the election hasn't happened yet? And it's an important decision that affects a lot of us?

And if we want to loose money placing bets can't we just bet on sports games or buy lottery tickets?

Because that is useless shit?

Re:Iowa Electronic Market goofed up (4, Insightful)

AVee (557523) | about a year and a half ago | (#42825099)

If we want to know the outcome of elections, can't we just count the votes?

Because the election hasn't happened yet? And it's an important decision that affects a lot of us?

Well, if that's an issue to you hold the elections a week earlier.

And if we want to loose money placing bets can't we just bet on sports games or buy lottery tickets?

Because that is useless shit?

Agreed, but it is what prediction markets are, a way to bet on something. All the talk about it is just people trying to pretend their betting somehow isn't the useless shit it really is. Prediction markets is betting for snobs, nothing more.

tl;dr? (0)

Anonymous Coward | about a year and a half ago | (#42821907)

Can I have the short version please? I haven't had any coffee yet.

Re:tl;dr? (-1)

Anonymous Coward | about a year and a half ago | (#42821969)

Short version: "Blah blah blah" *hot air puff* "Blah blah blah".

Re:tl;dr? (0, Insightful)

Anonymous Coward | about a year and a half ago | (#42822017)

Short version: Bennett's talking out of his ass again. Just wait half an hour and someone will dismantle his argument for us.

Re:tl;dr? (2)

Ol Biscuitbarrel (1859702) | about a year and a half ago | (#42822211)

I was going to comment that someone would post tl;dr, but in doing so I would manipulate my own prediction, thus leading to a comment section without any such posting from another slashdotter. Wouldn't want to do that. Or become your own grandfather. Ick.

Re:tl;dr? (-1)

Anonymous Coward | about a year and a half ago | (#42822331)

Wouldn't want to do that. Or become your own grandfather. Ick.

Speak for yourself. My gran was hot!

Re:tl;dr? (0)

Anonymous Coward | about a year and a half ago | (#42822771)

The short version is: its really stupid to believe a prediction markets. He isolated a particularly obvious moment when it would be stupid to believe it, and suggests putting up a disclaimer. Of course, there are MANY OTHER times when it would be dumb to believe it, and, still worse, nobody is going to pay any attention to this anyway. Hopefully this whole "market prediction" nonsense will go away, but I was wrong about bitcoin, which wound up being very useful for the black market. Presumably this will have some similar illicit purpose that will keep it around.

Re:tl;dr? (1)

Impy the Impiuos Imp (442658) | about a year and a half ago | (#42823263)

In the longer term, markets that were distortable, especially at critical moments, would this lose accuracy as a predictor.

This could be tallied and reported on. Market XYZ has shown 30% distortion from actual results close to an election.

Re:tl;dr? (1)

Gorobei (127755) | about a year and a half ago | (#42823735)

Short version: Bennett's talking out of his ass again. Just wait half an hour and someone will dismantle his argument for us.

What's the point? His argument is based on absurdities (why would you expect a prediction market to get the "true" answer unless nobody cares about the answer?)

Just reading recent news about the LIBOR fixing scandal should tell him his axioms are wrong.

Hardly any point in going into more depth. Or bothering to cite the tens of thousands of pages of research on markets (something people trading stuff for money care about a great deal.)

Re:tl;dr? (1)

geekoid (135745) | about a year and a half ago | (#42825391)

It's not based on absurdities at all. Don't let your ego assume things you don''t understand are absurd.

Re:tl;dr? (1)

Gorobei (127755) | about a year and a half ago | (#42826033)

It's not based on absurdities at all. Don't let your ego assume things you don''t understand are absurd.

Feel free to explain why prediction markets should be unbiased.

Or, just look at your vast history of posts that nobody upvotes or cares about. You would seem wiser if you typed less.

Even your sig is sad: do you get confused by others' snark, or do you wonder why others don't recognize your incoherent utterances as snarky? Did you ever have sex with a girl who didn't have panties emblazoned with "Insert here" on the front?

Re:tl;dr? (1)

X0563511 (793323) | about a year and a half ago | (#42822277)

Yes, can anyone summarize the summary for me? Jeez.

Re:tl;dr? (1)

Sperbels (1008585) | about a year and a half ago | (#42822719)

First world problems.

Re:tl;dr? (1)

geekoid (135745) | about a year and a half ago | (#42825409)

It's complex, and that IS the short version. Just move along, or jump in and spend time learning.

Re:tl;dr? (1)

larry bagina (561269) | about a year and a half ago | (#42822835)

He developed a solution -- that isn't actually a solution -- to a problem -- that isn't actually a problem.

Invalid assumption about the news outlets (4, Insightful)

characterZer0 (138196) | about a year and a half ago | (#42822035)

The hope is that news agencies, no matter how lazy they may be, will at least choose to report accurate information if it takes the same effort as reporting inaccurate information, and thus would prefer getting their information from the domestic capped market, where they can easily check if there's a disclaimer saying the odds have been manipulated recently.)

Nope. The news agencies try to report advertising-selling and ratings-boosting information, not accurate information.

Re:Invalid assumption about the news outlets (-1, Flamebait)

osragati (2835751) | about a year and a half ago | (#42823521)

http://www.cloud65.com/ [cloud65.com] If you think Martin`s story is something..., last pay-check my cousinns step-daad also brought home $7757 just sitting there ninteen hours a week at home and there co-worker's step-aunt`s neighbour done this for three months and recieved a check for over $7757 part-time on their computer. applie the tips on this page..

King Kanute (0)

Anonymous Coward | about a year and a half ago | (#42822055)

Ordering the sea to retreat.

Every attempt to fix a "fair" market price be it by regulations, loose agreements, through to government or central bank intervention is doomed to fail.

Markets are markets, if someone is prepared to spend (and lose) money to create a temporary distortion there is nothing that can be done about this save for removing the incentives to do so.

Disclaimers don't work. Ever. (3, Interesting)

NoNonAlphaCharsHere (2201864) | about a year and a half ago | (#42822067)

"Warning: The surgeon general has determined..."
"Professional driver, closed course, do not attempt"
"May result in loss of principal"
"Ask your doctor"

Creduluous people are going to ignore it, and sceptics already know to take it with a grainof salt.
My opinion, YMMV.

Re:Disclaimers don't work. Ever. (1)

Pope (17780) | about a year and a half ago | (#42824649)

Understand all product disclaimers with this one weird tip discovered by a mom in your area,

We took this guy apart last time. (4, Insightful)

HornWumpus (783565) | about a year and a half ago | (#42822075)

Why does he get more front page exposure?

Seriously, just look at the comments on his last manifesto.

He's a moron looking for a problem where none exists and should be ignored. Do not feed his ego. It's plenty big already.

Re:We took this guy apart last time. (0)

Anonymous Coward | about a year and a half ago | (#42822263)

because you, sir, don't have anything to contribute. why don't you come up with something interesting to read? it's easy to criticize others, but the matter of truth is, it really is because most people are either too timid or too lazy to actually put something worthwhile together. so if you are going to spend the time and effort criticize, you might as well start your own articles.

Re:We took this guy apart last time. (5, Informative)

HornWumpus (783565) | about a year and a half ago | (#42823057)

My point is last time this twit had exposure, we as a group thought about it.

Our conclusion: Ether the predictive market is big and not susceptible to market manipulation or it is small and it doesn't matter who tries to manipulate it because nobody pays attention to it anyhow.

'This is not a problem' was apparently never considered as one of the top 10 solutions. Typical. It would interfere with his manifestos.

Also the fact that features of betting escape him (for example, bookies don't give equivalent odds on both sides of bets) makes the rest of his analysis useless. Kind of like the Unibombers manifesto. When there are 10 fallacies on the first page their isn't much point in following the 'reasoning' past there.

Re:We took this guy apart last time. (1)

khallow (566160) | about a year and a half ago | (#42824681)

Plus, how many ways would he have to split that $100? I think I'd be lucky to get two cents out of the deal. I suppose I could put that to my next death star.

Re:We took this guy apart last time. (1)

geekoid (135745) | about a year and a half ago | (#42825617)

YOU conclusions are wrong.

Big markets get manipulate often, and sometime without nearly as much money as you think.

Dumping a lot of information can change markets, even if it's wrong, and removed seconds later.

You aren't thinking big picture. You can use a prediction market to hedge NYSE orders.
That, right there, tells us that they are worth manipulating, especially in less regulated areas.

When we are talking about decisions made in a millionth of a second, in several second bursts throughout the day, taking in a market prediction means more money.

Re:We took this guy apart last time. (0)

Anonymous Coward | about a year and a half ago | (#42822343)

I have no idea what's written there, just read the RSS summary, but I can say one thing for sure. Whatever he's saying, it's wrong. A good solution would've needed a single phrase.

Re:We took this guy apart last time. (5, Informative)

MaerD (954222) | about a year and a half ago | (#42822411)

Why does he get front page exposure? Because he's Bennett.
http://en.wikipedia.org/wiki/Bennett_Haselton [wikipedia.org]

You may not agree with him, or think that there is a problem here. But he's not exactly a moron.

Re:We took this guy apart last time. (5, Insightful)

Anonymous Coward | about a year and a half ago | (#42822537)

I read your link. He's as relevant to economic regulation as Stalman is to electorate theory. As with the old joke about asking a chess champion for military advice, leave them to what they are good at and find someone else for other subjects.

Re:We took this guy apart last time. (1, Insightful)

MaerD (954222) | about a year and a half ago | (#42822585)

I won't disagree. Many of the subjects outside of censorship that Bennett pontificates on make me roll my eyes and stop reading. But the question was "Why does this guy get front page exposure".. If Stallman decided to pontificate on electorate theory he'd probably make the front page just as fast.

Re:We took this guy apart last time. (1)

treeves (963993) | about a year and a half ago | (#42823381)

The front page of what?
Slashdot? Yes.
NY Times, Wall Street Journal, Mad Magazine? No.

Re:We took this guy apart last time. (0)

Anonymous Coward | about a year and a half ago | (#42822563)

He has a stub Wikipedia entry about his anti-censorship efforts. This makes him a noteworthy contributor on other, deeply complex topics, how?

Re:We took this guy apart last time. (1)

UnknowingFool (672806) | about a year and a half ago | (#42822643)

I have no problem with front exposure or his long treasties on anything. I have a problem with the editors publishing all of it. Seriously how hard is it for the editors to insist he post it all on a blog to which Slashdot will provide a link?

Re:We took this guy apart last time. (1)

mcmonkey (96054) | about a year and a half ago | (#42823767)

You may not agree with him, or think that there is a problem here. But he's not exactly a moron.

There may be many areas in which he in knowledgeable, but in these screeds he presents as a moron.

First, in his comparison of capped and uncapped markets, why does he ignore limit vs. no limit poker? This seems a good analogue in terms of the ability of deep pockets to affect one form of the game.

Second, what is his obsessions with the US presidential race? I don't think he addresses this above, but one of his previous postings suggested someone might affect the results of the presidential election to collect big in the prediction markets.

This is the plot of the worst Bond film ever. The ability to choose the next president of the US is huge. Who is going to waste that power on winning a bet? It's like having an all powerful weather control device, and only using it to make it snow on one day so you can have a snow day.

Third, he forgets he's dealing with people. I'm not usually one to go on about academia and ivory towers, but has this guy ever looked at an actual market? Could predictive markets be dominated by automated trading systems that instantly react to changes and shift money so all markets in the world are on sync? Sure. Is that likely to happen? No.

Why do new, commodity items sell in eBay auctions for higher than the currents prices from established retail outlets? Why do people spend $50 for HDMI cables from Best Buy when the same item can be had for $5 from monoprice? Why is best time to sell when everyone is buying, and the best time to buy when everyone else is selling?

People are irrational, news does not disperse equally to all corners of a systems, and markets reflect this.

Last, his selection of "winning" ideas makes no sense. Many are contradictory. "Make people place many small bets instead of one large bet. But publicize the names of anyone making a large bet." Wait...didn't you say you're not allowing any large bets? And how does that effect the manipulator anyway, since he's likely to want to make many small bets to hide his manipulation?

Re:We took this guy apart last time. (1)

khallow (566160) | about a year and a half ago | (#42824633)

Who is going to waste that power on winning a bet?

That depends how much money is riding on that bet. If you have a bet that pays a hundred billion dollars to you if Ron Paul wins the presidential election, then you have a little bit of incentive to throw things Ron Paul's way.

Re:We took this guy apart last time. (1)

mcmonkey (96054) | about a year and a half ago | (#42824901)

Who is going to waste that power on winning a bet?

That depends how much money is riding on that bet. If you have a bet that pays a hundred billion dollars to you if Ron Paul wins the presidential election, then you have a little bit of incentive to throw things Ron Paul's way.

But even with that crazy amount (what market is going to cover your hundred billion dollar bet?) I contend you can still gain more money through corporate subsidies, defense contracts, military action, MFN status, etc. by controlling who gets in to the White House.

If you come back and say, it's not about fixing the election and controlling who wins, it's just about winning a bet on who you think will win, then the whole debate is a non-story. That's not market manipulation, that's just plain old winning a bet.

There are 2 things at issue here. One is arbitrage--taking advantage of the difference between 2 markets. For example, if one market has Obama as the underdog with a bigger payout and another has Romney as the underdog with a bigger payout, and you're pretty sure (99+%) one of those 2 will win, you bet the underdog in both markets and you win no matter what the outcome of the election.

This is an old concept that is well researched. It's basically a solved problem, not interesting.

The other issue is a combination of effecting the prediction market while effecting the thing being predicted to improve your expected outcome. And this is where his case studies make zero sense. If you can control who will be the next president (to the extent that you're willing to put billions of dollars on the line), you have so much more to gain through the natural exercise of presidential power.

Re:We took this guy apart last time. (1)

geekoid (135745) | about a year and a half ago | (#42825645)

He talks about complex things I don't understand therefore he is wrong and a moron..said 70% of /.

sad, but true.

Re:We took this guy apart last time. (0)

Anonymous Coward | about a year and a half ago | (#42822745)

NERD FIGHT!!!!

Re:We took this guy apart last time. (1)

CaptainLard (1902452) | about a year and a half ago | (#42822989)

Ok maybe market manipulation affects US elections even less than voter fraud (i.e. no effect at all) and this is just a solution in search of a problem. But the method in which he got his answers has some interesting possibilities. He notes that his paid idea contests have good results and wants to compare them against unpaid idea contests. If paid ideas turn out to be better (yeah I know, but who's judgement, etc...details details), that could introduce an entirely new and much better type of internet forum!

I'm sure most would agree that a large amount of internet commenting is inconsequential/flamebait/astroturf and generally worthless to anyone but the person who got to burn 5 min at work writing it (possibly speaking for myself here). I'm not saying I know how to make it work but perhaps a paid comment section could possibly add to a story or article constructively like they were originally intended to!

Re:We took this guy apart last time. (0)

Anonymous Coward | about a year and a half ago | (#42823321)

He notes that his paid idea contests have good results and wants to compare them against unpaid idea contests. If paid ideas turn out to be better (yeah I know, but who's judgement, etc...details details), that could introduce an entirely new and much better type of internet forum!

Sure, but that's not what happened. He proposed a solution to a non-problem, then explained why that solution wouldn't work. He then offered $100 for a solution that would work. The correct solution is none, because there's no problem. Any other solution is wrong. The fact that he didn't reward $1 each to the 100 people explaining why there was not problem to solve is a total failure of his experiment.

I don't always agree with him but find him valid. (1)

concealment (2447304) | about a year and a half ago | (#42823359)

Let's hold up a bit. Whether or not he's wrong, I think the type of thinking he does is useful here.

Our entire society is detail-obsessed and linear thinking obsessed. Hazelton offers another view, which is a top-down analysis based on a high level of abstraction. If new ideas are going to emerge, they're going to come from this process, not more churning through details based on past precedent.

I think what he's doing here is quite valid. Markets need some regulation; that's clear, and as much as I'd like to agree with my libertarian friends, I can't stomach the idea of a world following the ethics of fast food and television, which is what would result with pure consumer markets.

However, it's important to make sure that regulation doesn't screw up the process of the markets themselves, and I think Hazelton's analysis here shows a good way to think about that kind of problem.

Whether or not I think he's wrong in this instance has no bearing on the validity of his inquiries as a whole.

Not a problem (1)

Anonymous Coward | about a year and a half ago | (#42822135)

When this was on Slashdot before, I and others said this wasn't a real problem and no solution was needs. I'm still convinced this is true. The manipulator would just be wasting their money, so there's no problem to fix. If someone tried it, I'd love to take the easy bet against them. There will always be more people looking to profit by taking a manipulator's bad bet. If we have more manipulators than greedy players, no system is safe.

Easier soulution (0)

Anonymous Coward | about a year and a half ago | (#42822181)

I know what would stop market manipulation.

Dragging old, rich, white executives out of their offices and streets and publicly caning their hairy bleached white asses, followed by 6-8 years of incarceration in your average shithole prison.

You know, actually punishing them for the crimes they commit.

Novel concept, isn't it?

Re:Easier soulution (1)

NoNonAlphaCharsHere (2201864) | about a year and a half ago | (#42822245)

I am fascinated by your ideas and would like to subscribe to your newsletter.

Re:Easier soulution (1)

geekoid (135745) | about a year and a half ago | (#42825713)

The news letter is called:
"Things I don't agree with should all be crimes."

Re:Easier soulution (1)

geekoid (135745) | about a year and a half ago | (#42825695)

What crime?

Who Cares? (2)

anorlunda (311253) | about a year and a half ago | (#42822225)

Why do we have a compelling reason to care why these future prediction markets behave?

Re:Who Cares? (0)

Anonymous Coward | about a year and a half ago | (#42823385)

Prediction markets are important because they give you an indication of the future state of the market. Thus, they can help guide entrepeneurial activity now. Obviously, not using good forecasting techniques could lead to financial losses.

However, it seems best to use accepted forecasting principles (e.g. those of J. Scott Armstrong). Prediction markets might only be one component of an overall, scientific forecast. pollyvote.com is an excellent example of a more accurate forecast obtained by combining the results of prediction markets with other forecasting techniques (e.g. polls and expert judgements).

Re:Who Cares? (1)

geekoid (135745) | about a year and a half ago | (#42825877)

Great question.

Accurate predictive markets influences every other market.
So as a predictive market begin getting to a certain percentage, people can use that information to make decisions in other markets, like the NYSE.

And by people, I mean computers.. in milliseconds.

It can also lead information to get out , for example '70% likely hood person X will become president.' That in turn influences voter turnout.

Another issue
You are also rewarding people who can influence outcomes for the outcome of a predictive market.
Lets say their is a predictive market for the super bowl winner. Well if my reward is high enough, then it's in my best interest to disrupt them game. Say by running over a QB. If the reward is high enough, then any jail time I may serve might be outweighed by the reward.

hmmm. (4, Insightful)

mark_reh (2015546) | about a year and a half ago | (#42822281)

your scenario about elections being swung through manipulation of odds on Intrade is based on an assumption that large numbers of voters pay attention to the odds on Intrade and that those odds influence their votes. I'm not sure I believe either to be true.

I suspect your ideas are more applicable to stock markets where thinly traded stocks are in play among day-traders..

No, you got the wrong premise (1)

DragonWriter (970822) | about a year and a half ago | (#42825513)

your scenario about elections being swung through manipulation of odds on Intrade is based on an assumption that large numbers of voters pay attention to the odds on Intrade and that those odds influence their votes. I'm not sure I believe either to be true.

Actually, what it actually relies on is that a small-number of opinion leaders in media pay attention to Intrade, and that a large number of voters are subject to influence by the same small number of opinion leaders in media.

Human Stupidity/Greed, and other events not manipu (0)

Anonymous Coward | about a year and a half ago | (#42822287)

One major flaw. You assume that a warning will deter...Stupidity says not to, and greed might make me more likely to try and help the first person manipulate the odds, by maninipulating them even further, allowing the stupid to continue messing up the domestic market (ignoring the warning)

Further, in your example, say Romney announces his running mate is actually which severely boosts his political capital, suddenly, and *expectedly* the odds can change very rapidly. Now you warn users about things that aren't actually things that ought to be warned over, causing them to be more likely to ignore the warnings in the future leading to a vicious cycle of the first problem.

This is a completely invented problem (4, Insightful)

dkleinsc (563838) | about a year and a half ago | (#42822297)

The logic goes like this:
1. Manipulator with a large amount of cash to blow through places a large bet on Intrade and similar sites in favor of a candidate.
2. Media dutifully report that Intrade is giving odds in favor of the preferred candidate.
3. Voters mindlessly vote for whoever does best on Intrade.

The thing is, step 3 is wrong. Very wrong. What your average voter hears when media talking heads are talking about Intrade is "Shut up and tell me how the Knicks did last night!".

Re:This is a completely invented problem (1)

Impy the Impiuos Imp (442658) | about a year and a half ago | (#42823703)

It's known the winner will have supporters who continue to vote and the loser's will not bother, on the west coast after a winner is declared (I suspect this drove Rove's apparent madness, trying to keep Romney supporters going , not for Romney, but for other elections where a crash of Republican support may matter, even if Romney's fate was already decided.)

Re:This is a completely invented problem (2)

Khashishi (775369) | about a year and a half ago | (#42823979)

Most voters probably don't check Intrade, but they do watch the news. And media companies are likely biasing their coverage on the results of Intrade. Voters may be stupid but are not mindless. They do understand concepts such as wasted votes.

Re:This is a completely invented problem (1)

khallow (566160) | about a year and a half ago | (#42824719)

Media companies have a vested interest in portraying an election is as contested as possible until the end.

Actual rationale is more subtle (1)

DragonWriter (970822) | about a year and a half ago | (#42825625)

The logic goes like this: 1. Manipulator with a large amount of cash to blow through places a large bet on Intrade and similar sites in favor of a candidate. 2. Media dutifully report that Intrade is giving odds in favor of the preferred candidate. 3. Voters mindlessly vote for whoever does best on Intrade. The thing is, step 3 is wrong. Very wrong.

Well, the logic you present is inaccurate (at least as to the general argument for prediction markets influencing results; I'm not going to bother going back through Haselton's earlier post to see if he ever explicitly presented logic for his perception and what that logic is). The general argument is more subtle, and instead of #2 being that the media just reports the bare fact of the Intrade standings, that the Intrade standings influence the overall amount and positivity of coverage the media provides to the candidate, and in #3 instead of voters simply voting based on reported Intrade ratings, increases in the quantity and favorability of media coverage tend, on balance, to produce better results for candidates, all other things being equal.

Re:This is a completely invented problem (1)

geekoid (135745) | about a year and a half ago | (#42825909)

Actual, it doesn't change who someone votes for, it changes who comes out to vote. Mostly reporting X candidate has more votes means fewer of Y candidates will go out and vote.

Blaise Pascal (0)

Anonymous Coward | about a year and a half ago | (#42822353)

"I have made this letter longer than usual, because I lack the time to make it short." Blaise Pascall

This guy has two problems. First, he cannot distill his throughts into what the critical issue and solution is so he gives a rambling train-of-thought article. Second, he glosses over what the problem is and doesn't have me convinced there IS a problem.

Not worth the read.

-- MyLongNickName

$100 cash prize? (1)

nitehawk214 (222219) | about a year and a half ago | (#42822439)

Someone will manage to manipulate the market for answers to get the prize.

No one gives a shit. (2)

nedlohs (1335013) | about a year and a half ago | (#42822463)

1. Betting market odds mean exactly diddly-squat for the actual election.
2. Your writing is terrible, so even if they betting odds did matter your wall of text would still not be given a shit about.
3. Your ideas are worse than your writing, but that's a repitition of 1.

That you have to pay people to read your garbage and engage with you should be all the hint you need to have worked that out already.

Re:No one gives a shit. (0)

Anonymous Coward | about a year and a half ago | (#42822595)

PROTIP: The election was over after Nov. 2012. Stop betting on it.

Re:No one gives a shit. (1)

nedlohs (1335013) | about a year and a half ago | (#42825133)

I'm pretty sure there's more than one election.

Re:No one gives a shit. (1)

geekoid (135745) | about a year and a half ago | (#42825983)

PROTIP: If they are still taking bets on the 2012 election, I will KEEP making bets on it.

Also, if you know anyone taking bets on the 2010 Superbowl, I'd like in.

Re:No one gives a shit. (1)

geekoid (135745) | about a year and a half ago | (#42825957)

I give a shit.

1 - wrong, and they are having more of an impact every cycle.

Markets can get bigger, so thinking about their impact now is the smart thing to do.

I know, you would rather wait until it's a serious problem so you can complain about why no one did anything. Cause complaining is all you do.

Been there, Done that! (4, Interesting)

Randyj70999 (322677) | about a year and a half ago | (#42822689)

During the first election of Obama there was a Fan of McCain that attempted the manulation. Spending about 1.5 million over 10 days attempting to drive up McCain shares. It failed, look at the data from the period, every time the person placed 150K dollars on McCain, the market bought it up within minutes to the net effect that he lost 1.5 million dollars before giving up.

When an Intrade market is active, and that one was, the market will balance it out!

Re:Been there, Done that! (0)

Anonymous Coward | about a year and a half ago | (#42823035)

1) that just says that he didn't actually use enough money to manipulate the market.

2) i am not convinced it would have had any effect on the election anyway.

Re:Been there, Done that! (1)

khallow (566160) | about a year and a half ago | (#42824785)

1) that just says that he didn't actually lose enough money to manipulate the market.

We need to keep in mind here that market manipulation of this sort loses money. The goal is to create a perception that is more valuable to the manipulator than the money they have lost. Which is why point 2) is so important. The guy lost $1.5 million. He could have chosen to lose a lot more. But where is the gain for that effort?

Re:Been there, Done that! (0)

geekoid (135745) | about a year and a half ago | (#42826019)

Then how do you explain the 04 manipulation? And when the markets get bigger, how should we deal with that?

There is no solution (0)

Anonymous Coward | about a year and a half ago | (#42822793)

There is solution to this problem given the constraints. A solution can be found if all of the relevant markets are regulated. The problem can only be attenuated, not eliminated, as it is stated.

Close the stock exchange (1)

overmoderated (2703703) | about a year and a half ago | (#42822795)

Problem solved.

Opposite effect (1)

Americium (1343605) | about a year and a half ago | (#42822801)

You're actually less likely to vote if your candidate seems to be winning in your state, I don't know how he could be more wrong. This also ignores the fact that spending a large amount of money in others ways, like advertising, actually works.

Re:Opposite effect (2)

barakn (641218) | about a year and a half ago | (#42822985)

In that case, one would manipulate the market in favor of the candidate one wishes to lose, causing that candidates supporters not to go to the polls because they think the candidate is a shoe-in. And in case you haven't noticed, people hate political advertising more than they hate cancer and North Korea. This manipulation would be much stealthier.

Re:Opposite effect (1)

Americium (1343605) | about a year and a half ago | (#42823657)

Almost as stealthy as the way fox had horrible polling data.

Why? (1)

Anonymous Coward | about a year and a half ago | (#42822851)

Why would you want to prevent it? You've got two odds. The odds on the market, and the odds in the real world. Manipulating the odds in the market, doesn't really affect the odds in the real world. It's the myth about betting. If you and I have a bet about a football match, it doesn't affect the outcome. So what if the odds are different? Well over time, those that persistently get the odds the wrong way round, lose money, and so reduce their bets or stop playing. With no people to take the other side of the bet, at the odds they want, the odds change to reduce the profit to those who were making money. If the odds go the other way from the real odds, then the other side starts winning. Think of it as an evolutionary process. As a long term game, the odds will converge to the real odds. Check up on the prisoner's diliema. There are different stratageies when you are playing N games, where N is played in advance, compared to an unlimited number of games. You're just considering a single game, and its a special case that doesn't apply to the real world.

Re:Why? (0)

Anonymous Coward | about a year and a half ago | (#42823563)

>Manipulating the odds in the market, doesn't really affect the odds in the real world

Where is your evidence for this assertion?

>If you and I have a bet about a football match, it doesn't affect the outcome

It could if it your bets are on a prediction market, and, for example, some players see that they are expected to lose become demoralized. Where's your evidence that this, among many other possible effects, won't happen?

Re:Why? (1)

Pseudonym Authority (1591027) | about a year and a half ago | (#42824615)

Or it could them inspire them to fight harder to win out of spite. This is a total non-issue.

Meh. More taxes on the stupid. House wins. (1)

pla (258480) | about a year and a half ago | (#42823065)

Hey, can I still get in on that Obama vs Romney thing? I mean, sure, the odds have gotten worse for Romney since November, but just think of the payout if he wins!

Now if you'll excuse me, I have to go buy my weekly Megabucks tickets - Remember, "You can't win if you don't play!"

There is no problem (1)

Eightbitgnosis (1571875) | about a year and a half ago | (#42823077)

There's a thing called reputation. If the reputation of these prediction markets is that they are manipulated then no on will trust them.

If a news outlet takes information from these manipulated markets, knowing they are manipulated, then that network was really just arbitrarily picking up pieces of data that appear to support whichever political party that station is allied to. They would have found anything that works to support their dialog.

Re:There is no problem (1)

Pseudonym Authority (1591027) | about a year and a half ago | (#42824687)

Forex is more manipulated than an abused child but millions still think they are going to outsmart all the central banks in the world and bet their retirements on it.

Clearly, reputation matters less than you say.

Re:There is no problem (1)

DragonWriter (970822) | about a year and a half ago | (#42825727)

Forex is more manipulated than an abused child but millions still think they are going to outsmart all the central banks in the world and bet their retirements on it.

Yeah, but no one trusts it as a means of predicting future events. The thing prediction markets rely on reputation for is their perception as useful for prediction (which is also what manipulators hoping to manipulate election results through those markets rely on.) So, its a problem, if it actually exists, with a certain amount of built in control -- if the markets are seen to be manipulated, manipulating them will have less value.

What's wrong with weighted odds? (2)

pesho (843750) | about a year and a half ago | (#42823087)

By definition large manipulative bets would be outliers. Calculate the odds by reducing the weight of the outliers and provide both weighted and unweighted odds to the participants.

Failure to reject the null hypothesis. (1)

pla (258480) | about a year and a half ago | (#42823203)

On the other hand, if the odds have shifted significantly in only one of those markets, that could be taken as a sign that that market was being manipulated.

Or, y'know, maybe it just reflects the fact that Americans have a teensy bit more input into who becomes the next president of the US than, say, Germans?

Here's an idea (0)

Anonymous Coward | about a year and a half ago | (#42823355)

Hire someone to figure it out. You aren't paying us enough to figure it out for you.

2 Technical Issues (1)

alexander_686 (957440) | about a year and a half ago | (#42823599)

One of your solutions is that you would flag bets where there has been a large movement in another market.

First, you would have to figure out all of the explicit angles. For a example, read about “Crack Spreads”. Here, you need to manage 3 or more different predictions that must keep a (mostly) constant ratio. Crude Oil (input) can be made into different combinations of gasoline, diesel, heating oil, etc. If these ratios deviate then there is money. You must identify all of them.
http://en.wikipedia.org/wiki/Crack_spread [wikipedia.org]

Second, you need to figure out the statistically significant angles. You have a bet on the 2012 elections. What if another site offers a bet on who will win Ohio, a critical swing state? Making this bet is almost the same as making your bet. How about the number of house seats that the democrats win? A big turnout for Obama should increase this number. The fit is less tight then Ohio, but still. What is your cut off?

Re:2 Technical Issues (1)

alexander_686 (957440) | about a year and a half ago | (#42824245)

A addendum to my post. Do you want the profit motive to a primary drive on your market?

Would somebody try to throw the market by manipulating the market? Maybe – but I don’t think it would have much impact. Corning / manipulating the market is hard in the long run. When the Hunt Brothers tried to corner the silver market in the 70s people kept on melting down their silverware.

You would want people to make big bets as insurance. If a company is worried that they will lose money on a Obama win they will put a big bet on Obama winning as a hedge. The loss from higher taxes would be offset by the winning bet. This will bring in engaged, active people which will make for a more lively, deeper market.

You want the market to be manipulated. When Oil futures go up people start drilling new wells, buying more efficient cars, investing is wind farms, etc. There are, of course, expectations. You don’t want a bettor to offer cash to a boxer to take a dive. You don’t want to offer a bet that a horse will come in last. Those will distort. However, if you are going to but in restrictions make sure you have the power to enforce those restrictions.

Capped markets = misguided socialism (0)

Anonymous Coward | about a year and a half ago | (#42823733)

Arbitrage can lead to massive financial losses for those who attempt to manipulate market. See http://en.wikipedia.org/wiki/Cornering_the_market

"as long ago as 1923, Edwin Lefèvre wrote, "very few of the great corners were profitable to the engineers of them."[2] A cornerer can become vulnerable due to the size of the position, especially if the attempt becomes widely known. If the rest of the market senses weakness, it may resist any attempt to artificially drive the market any further by actively taking opposing positions. If the price starts to move against the cornerer, any attempt by the cornerer to sell would likely cause the price to drop substantially. In such a situation, many other parties could profit from the cornerer's need to unwind the position."

Basically, astute investors will punish the manipulator by countering their foolish choices. The result is that these investors will typically be rewarded with financial gains for detecting the error and speeding the market to equillibrium. Meanwhile, the manipulators will sustain heavy financial losses. The greater the manipulation and the greater the disequillibrium, the more investors will smell profit and enter the market to punsh the manipulators.

By capping the market, you are saying that as a socialist central planner you know better ways of helping the market reach equillibrium, than countless competing profit-seeking market participants can.

This raises at least three questions:

1. If you are so smart at helping the market to reach equillibrium, why don't you prove it by throwing your own money into the fray?

2. If you are so smart at regulating the market, why not prove it by competing with other prediction markets who don't regulate in this way, and prove that your forecasts are more accurate than theirs? Can you show your "customers" who use your forecasts that your prediction market is worthwhile?

3. If you are so smart at regulating a prediction market run for profit, why not prove it by attracting more market participants? i.e. will market participants be attracted to your capped market or to one where their profit opportunity for detecting and punishing manipulation is unhampered?

Re:Capped markets = misguided socialism (0)

Anonymous Coward | about a year and a half ago | (#42823849)

Actually, I did not mean to imply that a private, capped market is a kind of socialism. What I mean is that it merely shows similar kinds of errors in thinking.

Re:Capped markets = misguided socialism (1)

alexander_686 (957440) | about a year and a half ago | (#42823993)

Not Arbitrage – maybe you are thinking about speculation?

Arbitrage, by definition, is a riskless trade that generates a profit. Buy IBM in New York for $50 while simultaneously selling it on London at $51. It’s free money by exploring a inefficiency in the system – which makes the system more efficient in the whole.

As a side note, everybody likes to say they practice arbitrage or a contrarian – but few actually are.
http://en.wikipedia.org/wiki/Arbitrage [wikipedia.org]

A fundamental issue (1)

alexander_686 (957440) | about a year and a half ago | (#42823759)

You have an incentive problem. You are trying to harness the profit motivation to create efferent, accurate, predictions. Then you gimp the motivation by placing artificial limits. You are gimping your own system.

Rational agents will try to work around these limits, because any inefficiency that can be overcome is more profit. This can be legitimate – see my post of technical issue – or illegitimate. What’s to stop me from opening multiple accounts? What’s to stop me from hiring 200 offshore persons to run my accounts?

You have 2 choices. You could get into a arms race. Without regulatory powers this is going to be hard.

Or, you could align the incentives up correctly. Large, liquid markets are harder to manipulate than small shallow markets.

Simple solution: Gross Receipts Tax (1)

Overzeetop (214511) | about a year and a half ago | (#42823833)

Move to a gross receipts tax - say 3%. Every transaction triggers it. Manipulations for short term gains become hopelessly mired in overhead.

You can just mail me the check.

Unforseen/Unaddressed Issue (1)

smartaleq (905491) | about a year and a half ago | (#42824105)

Several of the ideas discussed focused on identifying when capped and uncapped markets differ and presume that indicates market manipulation. However, each of these concepts focused on manipulation that was absent a newsworthy trigger. The discussed interventions would fail when a market manipulator simply tied their manipulations to real world news events. A well-funded manipulator could time bets to magnify the impact of candidate A favoring news, and blunt that for candidate B. The arbitrage players would quickly identify that the uncapped market shifted faster towards A and slower towards B, and would begin making predictive arbitrage bets on the capped market in exactly this fashion - working for the manipulator, before the manipulator itself begins to act.

Free market (0)

Anonymous Coward | about a year and a half ago | (#42824183)

Free Market's a bitch ain't it?

Please stop thinking out loud, in writing (0)

Anonymous Coward | about a year and a half ago | (#42824235)

This author should think to himself instead of thinking out loud, and distill his conclusions into something worth reading (or drop it if it's not worth reading.) I can't read very much of this.

Somewhat separately, why is the author holding court, making judgments, and distributing rewards in a discussion forum? Can you imagine people seated in a room, where one person starts handing out treats to people who say things he digs?

Auction mode (1)

netcruiser (1645001) | about a year and a half ago | (#42824403)

Many exchanges use an auction mechanism to prevent this from happening. When a trade is made that is more than x% different from the previous trade, the security goes into "auction mode" for a period of time. During this period all the bids and offers are taken, but only at the end of the auction, using an "uncrossing" algorithm, is a fair price determined for the security. The auction can of course also be manipulated, but you'll need a lot more money to influence the price.

The market prevails (1)

barakn (641218) | about a year and a half ago | (#42825033)

Bennett's supposition is that an uncapped market could be manipulated, and then arbitrage trading between that and a capped market could cause the value of the capped market to swing away from some true value. The problem with this thesis is the assumption that both markets have equal trust. The capped market should be trusted more, and arbitrage trading between the two markets will tend to bring the two prices closer to what the capped market's original value was.

A Better Idea (0)

Anonymous Coward | about a year and a half ago | (#42825773)

Get more people involved in the market. The bigger it is, the harder it is to manipulate.

We need votes from the many, not from the few.

Load More Comments
Slashdot Login

Need an Account?

Forgot your password?

Submission Text Formatting Tips

We support a small subset of HTML, namely these tags:

  • b
  • i
  • p
  • br
  • a
  • ol
  • ul
  • li
  • dl
  • dt
  • dd
  • em
  • strong
  • tt
  • blockquote
  • div
  • quote
  • ecode

"ecode" can be used for code snippets, for example:

<ecode>    while(1) { do_something(); } </ecode>