Wolfers, Justin (contributor); Zitzewitz, Eric (contributor) - 2006
believe that the probability of winning their bet
is q:
*
[(1)](1)[ ]
:
(1 )
jj j j j
{x}
j
j
Max EU =q Log y x q Log y x … initial wealth, y, who must choose how many prediction market securities, x, to
purchase at a price, π, given that they …
q
yielding x y
π π
π
ππ
+−+− −
−
=
−
The prediction market is in equilibrium when supply equal demand:
() ()
(1 …