One added wrinkle is that some people may have a positive incentive to make inaccurate bets, if they have something riding on the perception of the outcome, that's sufficiently important to them to be worth spending the money pumping up the perception. Whether that's feasible depends on the size of the market, but if InTrade drives even some of the news cycle, and if $100k can move the InTrade needle on a relevant issue, then blowing $100k on it is essentially advertising spend, an attempt at image-boosting.
The issues do muddy the waters for using them as prediction markets. It is awesome, however for the savvy investor.
My experience has been they are far, far more accurate than the media. It is the nature of the accuracy that is interesting, however. They come to decisions well in advance of the media -- weeks or even months early. A good example would be this last national election cycle, the prediction markets had Rick Perry and Michelle Bachman virtually closed out while their media coverage was still treating them as viable candidates.
They aren't always right in the long run, but they converge on the right answers much sooner than anything else I've seen, Nate Silver's efforts included.
The biggest problem is that in the US they are either illegal (deemed to be gambling) or just too small (IEM).
> but if InTrade drives even some of the news cycle, and if $100k can move the InTrade needle on a relevant issue, then blowing $100k on it is essentially advertising spend, an attempt at image-boosting.
True. Little enough good it did the Romney whale on election day, though: he handed $4m as a gift to all the other Intrade users, and it didn't move the needle anywhere.
