Authors: Berg, Henry; Proebsting, Todd A.

Source: The Journal of Prediction Markets, Volume 3, Number 1, April 2009 , pp. 45-59(15)

Publisher: University of Buckingham Press

Abstract:

From Hanson's “market scoring rule,” we derive all the necessary formulae to implement a corresponding automated market maker for a prediction market. The market maker has many desirable qualities and always stands ready to trade, thus providing liquidity to markets. The formulae cover all transactions for buying and selling market contracts. In addition, we address practical concerns like how to correctly treat rounding errors and how to prevent errors that allow traders to cheat the market, and provide a practical numerical example. We have used Hanson's automated market maker to run many markets at Microsoft.

Document Type: Research article

Publication date: 2009-04-01

More about this publication?

• Editorial Board
• Information for Authors
• Subscribe to this Title
• ingentaconnect is not responsible for the content or availability of external websites

Related content

• In this: publication
• By this: publisher
• By this author: Berg, Henry ;  Proebsting, Todd A.

Website © Publishing Technology. Article copyright remains with the publisher, society or author(s) as specified within the article.

• Terms and conditions
• Privacy policy
• Information for advertisers