RT Monograph
SR 00
A1 He, Xue-Zhong
A1 Treich, Nicolas
T1 Necessary and Sufficient Conditions for Prediction Market Accuracy
YR 2011
FD 2011-02
K1 Prediction market
K1 heterogeneous beliefs
K1 risk aversion
K1 favorite-longshot bias
K1 and asset prices
AB We consider a binary-event prediction market in which traders have  heterogeneous prior beliefs. We derive conditions so that the prediction  market is accurate in the sense that the equilibrium price equals  the mean of traders’ beliefs. We show that the prediction market is  accurate i) for all distributions of beliefs if and only if the utility function  is logarithmic, and ii) for all strictly concave utility functions if  and only if the distribution of beliefs is symmetric about one half. We  also exhibit a necessary and sufficient condition for the equilibrium  price to be always above or below the mean beliefs for all symmetric  beliefs distributions.
AV Published
LK https://publications.ut-capitole.fr/id/eprint/16442/
UL http://tse-fr.eu/pub/25825