Prediction Market Arbitrage Opportunities

Moneybox
A blog about business and economics.
Nov. 6 2012 9:54 AM

Prediction Market Arbitrage Opportunities

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Just about the clearest illustration you could ask for that prediction markets aren't quite ready for prime time yet is this whopping divergence between the odds of an Obama victory that are available on Betfair versus Intrade.

In a proper "efficient" market, arbitrageurs would take advantage of that money-making opportunity and in doing so would end up closing the price divergence. But there simply isn't enough money at stake to create the kind of deep liquid markets where that happens.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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