In the special case of all-or-nothing bets, we have a different outcome space than in trading and can model things differently. Introductory: Zvi Mowshowitz on Kelly bets. People often think about this for sports, but we could also imagine betting in the broader context of prediction markets.
- A Bet is a Tax on Bullshit
- Bets do not (necessarily) reveal beliefs
- How It Works - BETR
- Sports Betting App | Live Online Sports Betting | ZenSports
Making markets doesn’t only work on binary propositions, it also works on quantities. For quantities you quote a market as well as a conversion factor for the contract’s pay-out, for example “I’m 8 at 30 for the number of people who show up to my talk, $2 per person”. That would mean I’m willing to buy a contract that pays out $2 for everyone who comes to my talk for $16 (8 people times 2 dollars/person) and sell such a contract for $60 (30 times 2). If I sold such a contract, and then 34 people came to my talk, I’d need to pay out $8 on net.