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?