[extropy-chat] Bayes, betting and derivatives

[Eliezer S. Yudkowsky]

Robin Hanson wrote:
> 
> 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.

Why would Bayesian wannabes with common knowledge of each other's 
rationality have any expectation of gain in a betting market?  Why would 
I ever sell my bet - given the fact that you offer me more money than I 
thought my bet was worth, and I believe you to be rational, and I 
believe you expect to make a profit?  Wouldn't I just adjust my estimate 
of the fair price upward, and then refuse to sell?

-- 
Eliezer S. Yudkowsky                          http://singinst.org/
Research Fellow, Singularity Institute for Artificial Intelligence