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Designing Markets for Prediction

Yiling Chen, David M. Pennock·January 14, 2025·Academic Paper
prediction markets can incentivize truth-telling even when no objective answer exists

Why It's Worth Reading

Academic survey of prediction mechanism design from a mechanism design perspective. Covers scoring rules, market scoring rules (LMSR), cost-function-based market makers, dynamic parimutuel markets, incentive compatibility, combinatorial markets, and peer prediction systems for subjective events where ground truth doesn't exist.

Extensive technical background assumed

Concepts

Platforms mentioned: Iowa Electronic Markets

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