combinatorial prediction markets

Prediction markets that allow participants to place bets on conditional events and Boolean combinations of base events, not just individual outcomes. By enabling richer betting vocabularies, they can elicit joint probability distributions over related events rather than only marginal probabilities.

Cluster: Mechanism Design

Related Concepts

• market scoring rules — A class of automated market maker mechanisms that subsidize trade by penalizing a market maker according to a proper scoring rule. Traders profit by moving prices closer to their beliefs, ensuring the market maker absorbs losses in exchange for eliciting honest probability estimates. LMSR is the most widely used instance.
• LMSR (logarithmic market scoring rule) — An automated market maker that prices trades using a logarithmic cost function, guaranteeing bounded loss.
• proper scoring rules — Incentive-compatible functions that reward forecasters most when they report their true beliefs honestly.
• forecasting accuracy — Measuring how well predicted probabilities match actual outcome frequencies over many events.

Articles about combinatorial prediction markets

• Combinatorial Prediction Markets: An Experimental Study by Powell, Hanson, Laskey & Twardy