Non-myopic strategies in prediction markets

One attractive feature of market scoring rules [Hanson '03] is that they are myopically strategyproof: It is optimal for a trader to report her true belief about the likelihood of an event provided that we ignore the impact of her report on the profit she might garner from future trades. This does not rule out the possibility that traders may profit by first misleading other traders through dishonest trades and then correcting the errors made by other traders. Such non-myopic strategies are difficult to analyze, and the empirical results are inconclusive. In this paper, we describe a new approach to analyzing nonmyopic strategies and the existence of myopic equilibria. We use a simple model with two partially informed traders in a single information market to gain insight into the conditions under which different equilibrium behavior emerges. We prove that, under generic conditions, the myopically optimal strategy is not a sequential equilibrium strategy for the logarithmic marke...

• Type: Journal
• Year: 2008
• Where: SIGECOM
• Authors: Stanko Dimitrov, Rahul Sami
• Keywords: Attractive Feature, ECommerce, Market, SIGECOM 2008, Such Non-myopic Strategies