no-trade theorem

Milgrom and Stokey result showing rational traders with common priors cannot profit from private information alone, which predicts thin trading in pure information markets. Explains why prediction markets need liquidity subsidies, betting interest, or payoff structures beyond information revelation to sustain volume.

Cluster: Information Theory

Related Concepts

• platform competition — How prediction market platforms differentiate, compete for users, and defend market share.
• event contracts — Standardized binary contracts on specific real-world events, the core trading unit of prediction markets.
• sports betting — Wagering on the outcome of sporting events, one of the oldest and largest prediction markets. Its odds aggregation and pricing dynamics offer lessons for how event markets handle information, liquidity, and crowd behavior.
• info finance — Using financial market mechanisms to elicit, aggregate, and trade on informational signals about future events.

Articles about no-trade theorem

• How Prediction Markets Finally Broke Through by DWF Labs