Category:Market Scoring Rules (MSR)

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This market model was introduced by Robin Hanson. In a simple score rating model the individual estimates the probabilities and gets paid according to her estimation accuracy, MSR, any trader can change this score continuously, thus acquiring a coupon with the new probabilities. On market closing, the coupon will pay off the person holding it according to the price assigned to the market scoring rule. This model implements an automatic market maker. The characteristics of this model are:

  1. Bi-directional liquidity in thin markets through the automated market maker. In the extreme case of one trader it behaves as the basic Scoring Rules model, while in thick markets provide the accuracy of a market mechanism.
  2. Continuous incorporation of new information through the change of the probability distribution.
  3. Support a combinatorial (multi variable) and conditional information market
  4. Requires a subsidizing patron, but patron's risk is bounded

Further reading

Hanson, R. (2002). Logarithmic market scoring rules for modular combinatorial information aggregation. Working Paper, George Mason University Department of Economics

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