Prediction markets where an event is divided into multiple mutually exclusive outcome ranges (e.g., price brackets), each tradeable. Contrasts with binary markets that only ask yes/no questions.
Cluster: Mechanism Design
Prediction markets where an event is divided into multiple mutually exclusive outcome ranges (e.g., price brackets), each tradeable. Contrasts with binary markets that only ask yes/no questions.
Referenced in 2 articles
Analyzes 36,777 Polymarket events to understand what happens when continuous questions are split into dozens of independent binary contracts. Volume follows an extreme Pareto distribution: the top 3 markets capture over 75% of trading activity regardless of event size, leaving a large fraction as untradeable ghost markets. The $0.01 tick size compounds the problem, creating a rounding tax that makes low-probability contracts structurally imprecise.
Uses the March 2026 Strait of Hormuz crisis to argue that binary order-book prediction markets hit an architectural ceiling when pricing granular, multi-outcome risk. Compares how traditional options solve this for tradable assets, then explains how automated market scoring rules (LMSR/CLMSR) offer protocol-native liquidity, coherent pricing, and capital efficiency for events without underlying assets. Walks through a concrete WTI crude oil scenario showing how scoring-rule markets reward precise thesis expression over simple directional bets.