[extropy-chat] Bayes, betting and derivatives

[Robin Hanson]

At 05:39 PM 6/5/2006, Damien Sullivan wrote:
>In light of Bayesian wannabes coming to agree on matters of fact, would
>a pure population of Bayesian wannabes have use for a derivatives
>market, or more generally for making bets?  Seems the point of a bet
>(outside of games of pure chance) is the belief that you know more about
>an outcome than the other guy.  But if a Bayesian offers a bet and
>another Bayesian takes it, seems like both should pause for further
>thought.  Actually, simple knowledge that someone was offering a bet
>should make the second Bayesian pause to reconsider.
>Robin?  Hal?  Help? :)

Risk-averse Bayesian wannabes would not make pure bets with each other
seeking financial gain.   Risk-loving ones might make bets, but only to
achieve the risk they want, not because of any disagreement.    Derivatives
markets supposedly help people to hedge risk, and not just to make bets.
And a patron who wanted to get answers to a question might subsidize
a betting market, thereby inducing Bayesian wannabes to bet there.



Robin Hanson  rhanson at gmu.edu  http://hanson.gmu.edu
Associate Professor of Economics, George Mason University
MSN 1D3, Carow Hall, Fairfax VA 22030-4444
703-993-2326  FAX: 703-993-2323