A Manipulator Can Aid Prediction Market Accuracy

Abstract

Prediction markets are low volume speculative markets whose prices offer informative forecasts on particular policy topics. Observers worry that traders may attempt to mislead decision makers by manipulating prices. We adapt a Kyle‐style market microstructure model to this case, adding a manipulator with an additional quadratic preference regarding the price. In this model, when other traders are uncertain about the manipulator's target price, the mean target price has no effect on prices, and raising the variance of the target price can increase average price accuracy, by boosting the returns to informed trading and thereby incentives for traders to become informed.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 75 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.