Previously on Prediction Markets (among others): Prediction Markets: When Do They Work?, Subsidizing Prediction Markets

Epistemic Status: No huge new insights, but a little fun, a little free money, also Happy Petrov Day?

Yesterday, with everything happening regarding impeachment, I decided to check PredictIt to find out how impactful things were. When I checked, I noticed some obvious inconsistencies. They’re slightly less bad today, but still not gone.

I figured it would be fun and potentially enlightening to break this down. Before I begin, I will state that unless I messed up this post expresses zero political opinions whatsoever on what election or other outcomes would be good or bad, and does its best to only make what I consider very safe observations on probabilities of events. All comments advocating political positions or candidates will be deleted in reign-of-terror style. No exceptions.

Market Analysis

Odds are represented as cost in cents for each contract that pays $1, so they double as probabilities out of 100.

Let us look at the democratic nomination odds, using last. All are 1 cent wide:

Elizabeth Warren 50

Joe Biden 21

Andrew Yang 10

Bernie Sanders 8

Pete Buttigieg 6

Hillary Clinton 5

Kamala Harris 4

Tulsi Gabbard 3

Amy Klobuchar 2

Can be sold for 1: Corey Booker, Tom Snyder, Beto ‘o Rourke

All other candidates can be bought for 1 and cannot be sold.

Adding that up we get 112. We could buy all the no sides for a total of 111 – you can get these prices on no except for Warren, where you’d sell at 49.

That’s certainly some free money. If you sell all of them, you don’t tie up any money, although you do have to deposit, so it’s a pretty great trade, albeit with an $850 limit.

I’ve already done many of the legs of that trade. Some are better than others. Hillary Clinton at 5 is complete insanity. Andrew Yang is trading at 10 because internet. That likely covers most of the reason you can sell the field for 111. Lower them to sane numbers (let’s be super generous and say Hillary Clinton 1, and say Andrew Yang 5) then the field would add to 102. Completing the trade is mostly about freeing up your capital. You also get some value for it being someone not on the above list, as the ‘brokered convention causes weirdness’ scenario is definitely not impossible. The weird thing is expecting that to someho...

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