Tyler Cowen has this criticism of prediction markets which is like (paraphrased, plus slightly made up and mixed with my own opinions): “The whole concept is based on people individually trying to maximise their wealth, and this resulting in wealth accruing to the better predictors over time. But then in real life people just bet these token amounts that add up to way less than the money they get from their salary or normal investments. This completely defeats the point! You may as well just take the average probability at that point rather than introducing this overcomplicated mechanism”.
Play money can fix this specific problem, because you can make it so everyone starts with the same amount, whereas real money is constantly streaming in and out for reasons other than your ability to predict esoteric world events. I think this is an underrated property of play money markets, as opposed to the usual arguments about risk aversion. (Of course if you can buy play money with real money this muddies the waters quite a bit)
Tyler Cowen has this criticism of prediction markets which is like (paraphrased, plus slightly made up and mixed with my own opinions): “The whole concept is based on people individually trying to maximise their wealth, and this resulting in wealth accruing to the better predictors over time. But then in real life people just bet these token amounts that add up to way less than the money they get from their salary or normal investments. This completely defeats the point! You may as well just take the average probability at that point rather than introducing this overcomplicated mechanism”.
Play money can fix this specific problem, because you can make it so everyone starts with the same amount, whereas real money is constantly streaming in and out for reasons other than your ability to predict esoteric world events. I think this is an underrated property of play money markets, as opposed to the usual arguments about risk aversion. (Of course if you can buy play money with real money this muddies the waters quite a bit)