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Article

An empirical game-theoretic analysis of price discovery in prediction markets

Authors:

Sébastien Lahaie,

David M. PennockAuthors Info & Claims

IJCAI'16: Proceedings of the Twenty-Fifth International Joint Conference on Artificial Intelligence

Pages 510 - 516

Published: 09 July 2016 Publication History

Abstract

In this paper, we employ simulation-based methods to study the role of a market maker in improving price discovery in a prediction market. In our model, traders receive a lagged signal of a ground truth, which is based on real price data from prediction markets on NBA games in the 2014-2015 season. We employ empirical game-theoretic analysis to identify equilibria under different settings of market maker liquidity and spread. We study two settings: one in which traders only enter the market once, and one in which traders have the option to reenter to trade later. We evaluate welfare and the profits accrued by traders, and we characterize the conditions under which the market maker promotes price discovery in both settings.

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Cited By

Wang XVorobeychik YWellman M(2018)A cloaking mechanism to mitigate market manipulationProceedings of the 27th International Joint Conference on Artificial Intelligence10.5555/3304415.3304492(541-547)Online publication date: 13-Jul-2018
https://dl.acm.org/doi/10.5555/3304415.3304492
Wright MWellman MAndre EKoenig SDastani MSukthankar G(2018)Evaluating the Stability of Non-Adaptive Trading in Continuous Double AuctionsProceedings of the 17th International Conference on Autonomous Agents and MultiAgent Systems10.5555/3237383.3237475(614-622)Online publication date: 9-Jul-2018
https://dl.acm.org/doi/10.5555/3237383.3237475

An empirical game-theoretic analysis of price discovery in prediction markets
1. Applied computing
  1. Law, social and behavioral sciences

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cover image Guide Proceedings

IJCAI'16: Proceedings of the Twenty-Fifth International Joint Conference on Artificial Intelligence

July 2016

4277 pages

ISBN:9781577357704

Editor:
Gerhard Brewka
Leipzig University, Germany

Sponsors

Sony: Sony Corporation
Arizona State University: Arizona State University
Microsoft: Microsoft
Facebook: Facebook
AI Journal: AI Journal

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AAAI Press

Publication History

Published: 09 July 2016

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Cited By

Wang XVorobeychik YWellman M(2018)A cloaking mechanism to mitigate market manipulationProceedings of the 27th International Joint Conference on Artificial Intelligence10.5555/3304415.3304492(541-547)Online publication date: 13-Jul-2018
https://dl.acm.org/doi/10.5555/3304415.3304492
Wright MWellman MAndre EKoenig SDastani MSukthankar G(2018)Evaluating the Stability of Non-Adaptive Trading in Continuous Double AuctionsProceedings of the 17th International Conference on Autonomous Agents and MultiAgent Systems10.5555/3237383.3237475(614-622)Online publication date: 9-Jul-2018
https://dl.acm.org/doi/10.5555/3237383.3237475

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