alt Hacker NewsThat sounds cool and fancy in theory, but how do you find that information among the noise?
like if 50 ppl vote A, 45 people vote B and 1 person who actually knows their shit votes B?
How do you find it? By amount?
Replies
jstanley • today at 2:06 AM
Because the people who are consistently right will consistently win money and will make bigger bets which move the price more, in the limit case making the price converge on the true probability of the outcome.
This is the theoretical underpinning of prediction markets.
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Apart from minor effects, the price is the probability. If you 'know your shit', you have more confidence and thus bid up or down until there are no more counterparties willing to accept your price, and thus the price settles at approximately the expert/insider probability.