Linked markets

October 4, 2006 at 6:46 pm 1 comment

The prediction market’s list has been abuzz with the apparent contradiction between intrade and newsfutures predictions on the U.S. congressional elections this year. Newsfutures is tracking a much much higher confidence that the Democrats will take over the house this year than intrade is. Several points have been brought up, such as differnce in polling question: intrade asks for bids for or against the proposition that Republicans will retain control of the house in 2006, Newsfutures offers markets with the propositions house democrats regain control or Republicans will retain control of the House of Representatives. The later question nearly matches intrade’s question word for word, but if newsfuture’s site is any indicator, people perfer to bid on The Democrats will regain control of the house and hence possibly never see the flip side of the market. This doesn’t mitigate the possibility of a biased question (one point brought up on the mailing list), but does show that when given the choice, people are preferring to take the question that allows them to bid positively on their choice instead of intrade which requires people who think the democrats will win to take the position against the republicans. This is similar to the concept of framing in behavoiral finance. There’s a difference of about 10 points between the two markets apparently. Another option is that intrade is for real money and newsfutures is for pretend money, hence the traders on intrade (who might be influenced by a greater sense of loss aversion) might be researching their points more than the folks on newsfutures who have nothing to lose except replenishable points, but the later point might not be necessarily true. The traders on newsfutures might be more accurately (and sunnily) predicting a democract victory becuase they aren’t encumbered by an intrade trader’s potential loss, it might very well be that having real money involved means that people evaluate their options more sceptically than a newsfuture trader who might be more willing to take faith in their own assumptions. I am assuming the democrats will win the house in 2006 and hopefully along with it political accountability, but I am willing to admit I’m not to sure on it (most of the republicans I know from last election are still republicans). The recent teenage chat-a-thon sex scandal is sure to mar the republicans, but who knows what will happen to the democrats. I might add I’d never read about question framing before, but am finding it interesting and obviously relevant to the issue at hand.

Entry filed under: media.

genocide theory links for 2006-10-05

1 Comment Add your own

  • 1. dignifieddevil  |  October 5, 2006 at 12:34 pm

    from newsfutures:

    Hi Andrew,

    We indeed have to be very careful when defining the two opposite claims:
    they have to be exact opposites, or it might cause judging problems… That
    said, the idea of creating two “views” on the market (you can buy and sell
    on each side) was to try to be more user friendly by completely removing the
    need to resort to a “shorting” functionality. It is more natural to invest
    on a proposition you believe in than to invest against a proposition you
    don’t believe in. By letting people “buy” on opposite side, you let them
    trade with each other very naturally. I don’t think the results would be
    different, if we presented a single claim instead, plus shorting, but I
    expect some people would find the trading mechanics harder to understand.

    Of the traders who have participated to our House Control market, 63% have
    traded the Democratic contract, and 37% have traded the Republican contract,
    its opposite.

    –Emile
    NewsFutures

    Reply

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