Naive traders and mispricing in prediction markets

• 成果类型: Article
• 署名作者: Serrano-Padial, Ricardo
• 署名单位: University of Wisconsin System; University of Wisconsin Madison
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2012.05.020
• 发表日期: 2012
• 页码: 1882-1912
• 关键词: Naive traders; Double auction; common values; private information; prediction markets; Favorite-longshot bias

摘要

This paper studies pricing patterns in a speculative market with asymmetric information populated by both sophisticated and naive traders. Three pricing regimes arise in equilibrium: perfect pricing, with prices equalling asset values, partial mispricing and complete mispricing. Perfect pricing obtains when the presence of naive traders is small although not necessarily zero. When the fraction of naive traders is moderate prices are correct for some values but not for others. Finally, complete mispricing typically arises when the presence of naive traders is sufficiently high. Mispricing exhibits a systematic pattern of overpricing low values and underpricing high values. (C) 2012 Elsevier Inc. All rights reserved.