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Monday, April 04, 2005

Odds On The Next Pope

As difficult as it's been, I've tried not to make any comments on the recent passing of either Terry Schiavo or Pope John. However, I just can't pass up a good finance angle.

I've used prediction (betting) markets in my class for years as a tool to explain how markets process information. These contracts traded in these markets are very simple - a contract based on a given event (i.e. Bush gets elected president or UNC wins the NCAA tournament) pays off $1 if the event occurs and $0 if it doesn't (in econ-speak, it's an Arrow-Debreu security). So, the "fair price" of the security would be the probability of the event occurring. Prediction markets have been useful tools for aggregating information.

Tyler Cowen at Marginal Revolution brings us the following roundup of betting markets related to the papal succession:

Try here, here, and here, with the latter offering discussion as well. Thanks to the ever-keen Naunihal Singh for the pointer.

Addendum: Here are Tradesports.com odds by country, thanks to Paul N for the pointer.

Update: welcome to all the visitors from Hughhewitt.com - come on in, make yourselves comfortable, and have a look around.

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