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I think you misunderstand the mechanism. These are prediction markets. So people are betting on, say, what will the income of bottom decile be if we appoint A vs B vs C. Then we pick whoever is predicted to maximize income of bottom decile. Prediction markets have the property...
..that attempts to manipulate them makes them stronger. The more money is fed in by rich people trying to force a selection by making false bets (ie betting that A will increase income for poor by $6,000/yr when really it will be $2,000/yr), the more quants earn by fixing.
This system will maximize income for bottom decile regardless of whether bottom decile participates. Just like a prediction market on Superbowl outcome makes an accurate estimate whether or not the football players wager.
Sure, but what if Candidate B includes as part of their platform "I'll cut taxes on prediction markets"? A quant's rational self-interest may not focus *solely* on the outcome of a particular bet.
Also, maybe this is a solved question somehow, but I don't see how you'd *resolve* a bet like the one you described. How do you determine which candidate's plan actually maximizes income for the poor so you know which bet pays out?
You make make markets whose prices represent estimates E[X|A] if you will later know X and A. You don't need to later know anything else.
So do the E[X|B] bets just get cancelled if A wins? I feel like there are some unrecouped costs there, and a very real risk that manipulative bets on losing alternatives wouldn't be punished.
Easy answer, but really you should learn to solve these puzzles yourself, it's important and way below your pay grade to prove there is no market equilibrium with profit-seeking agents where a "manipulative bet" sets the price of a losing outcome.
There's a whole mathematical formalism here that I've just never had occasion to learn, I think. But I'm quite surprised that there's not some way to exploit the possibility of manipulative bets that are capable of *canceling* all payouts on the bet itself. What averts that?
It is a field (mechanism design, auction theory, etc) but this is a very basic application. 15-30 min proving the 2nd price auction result and reading examples of using no-arbitrage condition, and you could prove that a manipulated outcome is not an equilibrium.
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