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Thanks for the comments! I feel I understand this now to my satisfaction.

Say there is a market for "will I roll a 6 with a fair die?". The true probability is just under 17%.

Say the market is new, so it's at 50%. Some clever predictor comes along and bets NO. Unfortunately, without a subsidy it only takes like 50M to shift the market to 17% and after that there's no more profit to be made. The predictor only gets a few tens of mana for their trouble. If the market is more complicated than rolling a die (i.e. any real market), predictors might not bother putting in the effort to get an accurate probability estimate and the market might remain mispriced.

Now, say you add a 1000M subsidy at 50%. Now it'll take much more mana to shift the market. I can't do the maths, but let's say it takes 500M to shift it to 17%. Now the predictors can gain much more in absolute terms (but the same in relative terms) by putting in the effort to shift the market.

Market creators want to know what the true probability for an event is. Predictors want to make profits. Subsidies allow creators (and interested bystanders) to increase the size of the "correct prediction bounty", increase the potential profits that can be made, and so incentivise predictors to get the market to the correct percentage.

@Fion Just for Fun, (fun for the math nerds) If the market is initialized with M$50 mana at 50% probability and receives the full M$1000 liquidity subsidy before anyone bets in the market then the market will have 1050 shares of YES and NO in reserves. It would cost M$1270 to buy the 1844.785 NO shares required to shift the market to a 17% probability and the market reserves would then be 2320 YES shares and 475.215 NO Shares.

Thanks!

Discussion with folks trying to teach me how liquidity/subsidies work found here: https://manifold.markets/JoshuaB/will-i-understand-how-liquidity-and. Happy to answer any further questions!

Will I understand how liquidity and subsidies work by the end of March?

Resolved NO. Currently, I don’t really know how liquid subsidies get returned when a market is resolved. I would like to know. So, I’m creating this market to incentivize folks to explain it to me/point me in the direction of an explanation! Resolves YES if at any time before the end of March I und…

Sort of how like an innovation prize helps subsidize research. If you put money in the pot it encourages people to make more bet ma and try to figure out what the odds are

@KevinBurke How do you actually do this on Manifold though?

@IC On mobile tap the three dots in top right corner of market and click “Subsidize”

@KevinBurke Or email info@manifold.markets they’ll help

@KevinBurke Okay, I see how to do it. Where does this money go? How is it increasing people’s incentive to participate in my market?

@IC When you make a bet it just sort of multiplies the payout. So if you are making a bet at 2:1 odds you might instead get a 2.5 or 3x payout

@KevinBurke That's not quite true. What it does do is make the odds shift less when you do bet (and thus letting you bet more at a specific percentage)