“liquidity rewards tighten spreads only when daily spend exceeds 1% of the book”
taetaehoho runs an empirical analysis of Polymarket's liquidity rewards and sponsorships, finding they can tighten spreads only when daily spend exceeds roughly 1% of the existing book. Even above that threshold, incentive size barely predicts which markets respond; pre-existing liquidity conditions and pre-trends are far stronger determinants of uplift than reward intensity.
Some technical background helpful
Platforms mentioned: Polymarket