State-dependent Preferences in Prediction Markets and Prices as Aggregate Statistic

Urmee Khan (urmee.khan@ucr.edu)
Additional contact information
Urmee Khan: Department of Economics, University of California Riverside

No 201609, Working Papers from University of California at Riverside, Department of Economics

Abstract: If traders in prediction markets have state-dependent preferences so that marginal utility of money varies across states, prices in a Rational Expectation equilibrium are quantile statistics of distributions that de- rive from both the distribution of realized signals, and the distribution of state-dependence parameters. As a result, even with a common prior and regardless of whether prices reveal realized signals fully or not, the interpretation of prices as posterior probabilities remains problematic.

Keywords: Prediction markets; information aggregation; state-dependent preferences (search for similar items in EconPapers)
Pages: 8 Pages
Date: 2016-04
New Economics Papers: this item is included in nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations:

Forthcoming in Studies in Microeconomics

Downloads: (external link)
https://economics.ucr.edu/repec/ucr/wpaper/201609.pdf First version, 2016 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucr:wpaper:201609

Access Statistics for this paper

More papers in Working Papers from University of California at Riverside, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Kelvin Mac (kelvin.mac@ucr.edu).