[extropy-chat] Bayes, betting and derivatives
sjatkins at mac.com
Wed Jun 7 03:15:55 UTC 2006
On Jun 5, 2006, at 6:54 PM, Eliezer S. Yudkowsky wrote:
> Why would Bayesian wannabes with common knowledge of each other's
> rationality have any expectation of gain in a betting market?
The prices of the underlying stocks, commodities and so on cannot be
fully (to say the least) predicted. If it could there would be no
point in derivatives. Thus different Bayesians, even with full
common knowledge (very hard to come by in practice regarding markets
especially) may make different derivative plays. It is not a
> 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?
Because your market theory, fundamental and technical analysis may be
more accurate at least in the short run. This notion that exactly
the same knowledge, mathematically rendered the same is available to
all players and they all have effectively equal skill and
intelligence to boot is a far-fetched fantasy.
> Wouldn't I just adjust my estimate
> of the fair price upward, and then refuse to sell?
No. You might decide to recheck your conclusions though.
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