I bet 50 cents to your dollar that the S&P 500 will be above 2,500 on Jan. 1, 2018. Would I have bet 51 cents if offered? 55 cents? 75 cents? Without a bunch of participants, we'll never know.
Markets with low liquidity are terrible at price discovery. Price in a prediction market is (if we believe in the concept) directly tied to how likely a prediction is to be true.
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Why is low liquidity a problem? As long as there is someone betting for and someone against an outcome, a prediction market is successful, right?
I bet 50 cents to your dollar that the S&P 500 will be above 2,500 on Jan. 1, 2018. Would I have bet 51 cents if offered? 55 cents? 75 cents? Without a bunch of participants, we'll never know.
Markets with low liquidity are terrible at price discovery. Price in a prediction market is (if we believe in the concept) directly tied to how likely a prediction is to be true.