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Conference Paper: Budget constraints in prediction markets

TitleBudget constraints in prediction markets
Authors
KeywordsComputer Science and Game Theory
Artificial Intelligence
Issue Date2015
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?
AbstractWe 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 Identifierhttp://hdl.handle.net/10722/218929

 

DC FieldValueLanguage
dc.contributor.authorDevanur, N-
dc.contributor.authorDudik, M-
dc.contributor.authorHuang, Z-
dc.contributor.authorPennock, DM-
dc.date.accessioned2015-09-18T07:01:23Z-
dc.date.available2015-09-18T07:01:23Z-
dc.date.issued2015-
dc.identifier.citationThe 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.urihttp://hdl.handle.net/10722/218929-
dc.description.abstractWe 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.languageeng-
dc.relation.ispartofProceedings of the 31st Conference on Uncertainty in Artificial Intelligence-
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.subjectComputer Science and Game Theory-
dc.subjectArtificial Intelligence-
dc.titleBudget constraints in prediction markets-
dc.typeConference_Paper-
dc.identifier.emailHuang, Z: zhiyi@cs.hku.hk-
dc.identifier.authorityHuang, Z=rp01804-
dc.description.naturepostprint-
dc.identifier.hkuros250456-
dc.identifier.spage238-
dc.identifier.epage247-

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