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Conference Paper: Budget constraints in prediction markets
Title | Budget constraints in prediction markets |
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Authors | |
Keywords | Computer Science and Game Theory Artificial Intelligence |
Issue Date | 2015 |
Citation | The 31st Conference on Uncertainty in Artificial Intelligence (UAI 2015), Amsterdam, The Netherlands, 12-16 July 2015. In Conference Proceedings, 2015, p. 238-247 How to Cite? |
Abstract | We give a detailed characterization of optimal trades under budget constraints in a prediction market with a cost-function-based automated market maker. We study how the budget constraints of individual traders affect their ability to impact the market price. As a concrete application of our characterization, e give sufficient conditions for a property we call budget additivity: two traders with budgets B and B0 and the same beliefs would have a combined impact equal to a single trader with budget B +B0. That way, even if a single trader cannot move the market much, a crowd of like-minded traders can have the same desired effect. When the set of payoff vectors associated with outcomes, with coordinates corresponding to securities, is affinely independent, we obtain that a generalization of the heavily-used logarithmic market scoring rule is budget additive, but the quadratic market scoring rule is not. Our results may be used both descriptively, to understand if a particular market maker is affected by budget constraints or not, and prescriptively, as a recipe to construct markets. |
Persistent Identifier | http://hdl.handle.net/10722/218929 |
DC Field | Value | Language |
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dc.contributor.author | Devanur, N | - |
dc.contributor.author | Dudik, M | - |
dc.contributor.author | Huang, Z | - |
dc.contributor.author | Pennock, DM | - |
dc.date.accessioned | 2015-09-18T07:01:23Z | - |
dc.date.available | 2015-09-18T07:01:23Z | - |
dc.date.issued | 2015 | - |
dc.identifier.citation | The 31st Conference on Uncertainty in Artificial Intelligence (UAI 2015), Amsterdam, The Netherlands, 12-16 July 2015. In Conference Proceedings, 2015, p. 238-247 | - |
dc.identifier.uri | http://hdl.handle.net/10722/218929 | - |
dc.description.abstract | We give a detailed characterization of optimal trades under budget constraints in a prediction market with a cost-function-based automated market maker. We study how the budget constraints of individual traders affect their ability to impact the market price. As a concrete application of our characterization, e give sufficient conditions for a property we call budget additivity: two traders with budgets B and B0 and the same beliefs would have a combined impact equal to a single trader with budget B +B0. That way, even if a single trader cannot move the market much, a crowd of like-minded traders can have the same desired effect. When the set of payoff vectors associated with outcomes, with coordinates corresponding to securities, is affinely independent, we obtain that a generalization of the heavily-used logarithmic market scoring rule is budget additive, but the quadratic market scoring rule is not. Our results may be used both descriptively, to understand if a particular market maker is affected by budget constraints or not, and prescriptively, as a recipe to construct markets. | - |
dc.language | eng | - |
dc.relation.ispartof | Proceedings of the 31st Conference on Uncertainty in Artificial Intelligence | - |
dc.subject | Computer Science and Game Theory | - |
dc.subject | Artificial Intelligence | - |
dc.title | Budget constraints in prediction markets | - |
dc.type | Conference_Paper | - |
dc.identifier.email | Huang, Z: zhiyi@cs.hku.hk | - |
dc.identifier.authority | Huang, Z=rp01804 | - |
dc.description.nature | postprint | - |
dc.identifier.hkuros | 250456 | - |
dc.identifier.spage | 238 | - |
dc.identifier.epage | 247 | - |