I gave a presentation on prediction markets on Friday at NYU Stern’s Fintech conference, Betting on the Future.
The first part of the presentation focused on the results in my paper with Constantin Bürgi and Wanying Deng: Makers and Takers: The Economics of the Kalshi Prediction Market
The paper shows that Kalshi’s prices are generally pretty good forecasts but also documents a strong favorite-longshot bias pattern in Kalshi’s prices. Low-priced contracts win less than is required to break even and higher priced contracts win more often.
The second part of the presentation focused on “predictions about prediction markets.”
1. Biases will decline over time
2. Fees will fall over time
3. Sports prediction market providers will require live data feeds and suspensions for big events.
4. “Fake” taker-only prediction markets (like DraftKings Predictions) may win out.