Predicting the End of the Government Shutdown

(Photo: eGuide Travel)

(Photo: eGuide Travel)

Flip Pidot, co-founder and CEO of the American Civics Exchange, writes to let us know that the exchange has recently added cash prizes to their political prediction markets and is currently running two parallel government shutdown prediction markets, allowing for an interesting experiment:

At American Civics Exchange, we’ve just begun to implement cash prizes in our political prediction market (a sort of interim maneuver on our way to regulated exchange-traded futures).

For the government shutdown, we’re running two parallel markets – one in which traders buy and sell different shutdown end dates (with play money), yielding an implied odds curve and consensus prediction (below), and another in which traders simply log their best guess as to exact date and time of resolution (with no visibility into others’ guesses), with the closest prediction winning the real-money pot.

We’re interested to see which method yields better results – the market-driven one or the cash-incentivized one.  Of course, once full fledged real-money trading is launched, they’ll be one and the same, but this otherwise undesired interim half-measure may tell us something interesting.

Curious if you have any thoughts.  The market is running here.

What do you think, Freakonomics readers? Which market will yield better predictions?

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  1. Steve Cebalt says:

    Fascinating. A worthy experiment! I wonder how differently people are willing to stake a claim with play money vs. real money.

    “What are the odds that within hours of the U.S. federal government shut down, bets were wagered as to how long it will take Congress to reach a deal? It’s a sure thing, through bookmakers overseas including Ireland’s largest, Paddy Power, where bettors can put money on the length of the shutdown, whether the U.S. Treasury will default on its obligations by the end of 2013 and if there will be a quarter of negative growth. ”

    Source: http://abcnews.go.com/blogs/business/2013/10/place-your-bets-on-government-shutdown-2013/

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  2. mickey says:

    How is this different then what INTRADE was doing? I love the idea, but wondering why this is allowed, when INTRADE was put on the Fed naughty list and shut down?
    http://www.economist.com/news/finance-and-economics/21576148-flagship-prediction-market-faces-insolvency-bet-lynched

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  3. Max says:

    I’d say this will be all resolved just as the debt ceiling cap deadline comes due, around Oct 17th.

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