In markets like these, “cap losses” is equivalent to “cap wins”—the actual money is zero-sum, right? There certainly exist wagers that scale ($10 per point difference, on a sporting event, for instance), and a LOT of financial investing has this structure (stocks have no theoretical maximum value).
I think your capping mechanism gets most of the value—maybe not “the Nth response is yes”, but markets for a couple different sizes of vote counts, with thresholds for averages. “wins if over 10,000 responses with 65% yes, loses if over 10,000 less than 65% yes, money returned if fewer than 10,000 responses”, with a number of wagers allowed with different size limits.
In markets like these, “cap losses” is equivalent to “cap wins”—the actual money is zero-sum, right?
Overall, yes, per-participant no. For example, if everyone caps their loss at $1 I can still win $10 by betting against ten different people, though of course only at most 1 in 11 market participants will be able to do this.
There certainly exist wagers that scale ($10 per point difference, on a sporting event, for instance), and a LOT of financial investing has this structure (stocks have no theoretical maximum value).
Yeah, although the prototypical prediction market has contracts with two possible valuations, even existing prediction markets also support contracts that settle to a specific value. The thing that felt new to me about the idea I had was that you could have prediction contracts that pay out at times other than the end of their life, though it’s unclear to me whether this is actually more expressive than packaged portfolios of binary, payout-then-disappear contracts.
(Portfolios of derivatives that can be traded atomically are nontrivially more useful than only being able to trade one “leg” at a time, and are another thing that exist in traditional finance but mostly don’t exist in prediction markets. My impression there, though, is that these composite derivatives are often just a marketing ploy by banks to sell clients things that are tricky to price accurately, so they can hide a bigger markup on them; I’m not sure a more co-operative market would bother with them.)
In markets like these, “cap losses” is equivalent to “cap wins”—the actual money is zero-sum, right? There certainly exist wagers that scale ($10 per point difference, on a sporting event, for instance), and a LOT of financial investing has this structure (stocks have no theoretical maximum value).
I think your capping mechanism gets most of the value—maybe not “the Nth response is yes”, but markets for a couple different sizes of vote counts, with thresholds for averages. “wins if over 10,000 responses with 65% yes, loses if over 10,000 less than 65% yes, money returned if fewer than 10,000 responses”, with a number of wagers allowed with different size limits.
Overall, yes, per-participant no. For example, if everyone caps their loss at $1 I can still win $10 by betting against ten different people, though of course only at most 1 in 11 market participants will be able to do this.
Yeah, although the prototypical prediction market has contracts with two possible valuations, even existing prediction markets also support contracts that settle to a specific value. The thing that felt new to me about the idea I had was that you could have prediction contracts that pay out at times other than the end of their life, though it’s unclear to me whether this is actually more expressive than packaged portfolios of binary, payout-then-disappear contracts.
(Portfolios of derivatives that can be traded atomically are nontrivially more useful than only being able to trade one “leg” at a time, and are another thing that exist in traditional finance but mostly don’t exist in prediction markets. My impression there, though, is that these composite derivatives are often just a marketing ploy by banks to sell clients things that are tricky to price accurately, so they can hide a bigger markup on them; I’m not sure a more co-operative market would bother with them.)