cross-subsidization

Using revenue from commercially profitable prediction markets to fund liquidity incentives on socially valuable but self-sustaining markets, mirroring how newspaper ads subsidize investigative journalism.

Cluster: Business & Platforms

Related Concepts

• liquidity provision — Supplying capital so traders can buy and sell positions without excessive price impact or delays.
• adverse selection — Risk that counterparties trade because they have superior information, causing losses for the market maker.
• hedging — Taking offsetting positions to reduce exposure to adverse price movements or uncertain outcomes.

Articles about cross-subsidization

• How Prediction Markets Can Ascend by Alan Wu