We could deal with some of these issues by expanding the market.
We could add one set of meta-contracts (really futures contracts), dealing with the price of Ron Paul contracts every X time period. So you could bet that the price of a Ron Paul contract would fall before Y date, alleviating the waiting issue you mentioned.
With regard to the lopsided risk factor, traditionally you would want to deal with this by insuring yourself, and the same possibility could apply here: if a very large firm were involved in the business, they could spread their insuring counter-bets across a large number of people (they would make the opposite bet to you, then pay you if your bet fell through and get paid if you won).
Since you are risk-averse, there is some potential margin between your risk tolerance and risk-neutrality that a firm with high capital could exploit for profit.
Certainly—but as Robin Hanson points out, it’s precisely when people try to manipulate prices artificially that people are drawn into the markets to profit from those manipulators (and incidentally to prevent them).
We could deal with some of these issues by expanding the market.
We could add one set of meta-contracts (really futures contracts), dealing with the price of Ron Paul contracts every X time period. So you could bet that the price of a Ron Paul contract would fall before Y date, alleviating the waiting issue you mentioned.
With regard to the lopsided risk factor, traditionally you would want to deal with this by insuring yourself, and the same possibility could apply here: if a very large firm were involved in the business, they could spread their insuring counter-bets across a large number of people (they would make the opposite bet to you, then pay you if your bet fell through and get paid if you won).
Since you are risk-averse, there is some potential margin between your risk tolerance and risk-neutrality that a firm with high capital could exploit for profit.
If you bet on future bets, there’s incentive to manipulate some bets.
Certainly—but as Robin Hanson points out, it’s precisely when people try to manipulate prices artificially that people are drawn into the markets to profit from those manipulators (and incidentally to prevent them).