Thursday, August 06, 2015

Someone Has To Win

On December 7 of last year, the Carolina Panthers were 3-8-1 and I spent about 1100 Inkles forecasting that they would make the playoffs.  Even at long odds, this may seem like wasted Inkles--I'm pretty sure that a 3-8-1 had never gone on to make the playoffs.  But there were a couple other important factors.  The Panthers play in the NFC South; the winner of each division must make the NFL playoffs; and at the time the NFC South was led by the 5-7 Falcons and Saints (even the 2-8 Buccaneers had a chance).  The Panthers were an underdog, but they had a fighting chance.  As it turned out, the Panthers won their last four games to make the playoffs, and my 1100 Inkles turned into two hundred thousand.

I remember this scenario whenever I think about the Republican primary field.  None of the competitors seems all that compelling (in my personal opinion,) and it's easy to find arguments against each of them.  But someone will be the GOP nominee, and I'm trying to figure out which candidates are the favorites, which are legitimate underdogs, and which are best ignored.

Our market suggests that the top three candidates--Bush, Rubio, and Walker--have a combined 93% chance to win the nomination, which is higher but not that far from PredictWise's 72%.  So that's something to keep in mind when watching tonight's debate; of the ten candidates in the main event, prediction markets consider only three of them to be real contenders.  But there's also a chance another candidate emerges from the pack.  Donald Trump leads the polls with 23% support, while Ben Carson and Mike Huckabee are at 6.6%, ahead of Rubio's 5.2%.

One interesting feature of prediction markets is that they can react very quickly to new information (much more quickly than polls, which take days to execute).  Our markets will be open during tonight's debate, so if a candidate delivers a powerful comment (or a deadly gaffe), you can expect their forecasted likelihood of winning to move fairly quickly.

I'll continue to post updates over the course of the primary season, and might even devulge my sleeper picks to be the GOP nominee (hint: neither of them qualified for tonight's main debate.)

Ben Golden is a software developer, economist, and evangelist for Inkling Markets.  You can find him on Inkling Markets as benthinkin, and on Twitter, @BenGoldN.  Email him: ben at inklingmarkets dotcom

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