In case you missed it, there've been some fascinating experiments with self-resolving markets on Manifold lately. The idea of a self-resolving market is that sometimes it's hard or impossible to pin down unambiguous resolution criteria for a prediction. In that case resolving to the consensus of the market participants may make sense. And from a prediction market perspective, the obvious way to define "the consensus of the participants" is the market price. See also Keynesian beauty contests. It's weirdly self-referential but maybe there are conditions in which we expect it to work?
We've seen one spectacular failure -- https://manifold.markets/jack/will-biden-be-president-on-915-reso -- in which an exciting tug-o-war was waged that had little connection to what the market was purportedly predicting.
But I conjecture that that was mostly about the hard(ish) end date. In setting up the experiment we knew that a known end date opens the market up to price manipulation at the last second and we tried to mitigate that with a random close time, but it was a random close time within a small window. It was still possible to temporarily manipulate the price for profit.
So this is an experiment to see how close we get to the truth if the market self-resolves as follows:
The market won't close before the end of October (when the true outcome is known).
The market will then stay open until the market price fully quiesces, meaning it stays the same (to the nearest whole percent) for two business days in a row. The market then resolves to that price.
But if a market participant wants to go on vacation or something, they can just ask in the comments to not let the market close before they return. We want to only resolve to a genuine consensus probability.
If we go all the way [through] November without the market stabilizing then it resolves N/A. That would be a shame but not necessarily bad, in general, in terms of the market price being informative, if it's oscillating around some estimate of the underlying truth.
Point 3 might be silly and unscalable, I'm not sure. It's an experiment. But if it did make sense, one can imagine ways to make it scale to larger markets. The answer might be to stick to a strict definition of quiescence and traders can just use trading bots or limit orders while they're away. (Or we could just say that checking in every other business day isn't that onerous, suck it up.)
Point 4 may open up an unfortunate loophole in that a participant can force the price to oscillate if they don't like the outcome. I think liquidity fees could solve that (which may be important anyway, since it's a very valuable property of markets that liquidity increases with trading volume!) because then it would get more and more expensive to keep the price oscillating. For this experiment, we'll just take the risk that that happens. Since everyone gets their money back in that case, the risk is arguably not so bad.
UPDATE: From the comments, pinning down the criteria for quiescence:
If the market price stays the same or oscillates between consecutive integer percents from noon pacific to noon pacific two business days later (so at least 48 hours, longer over weekends and holidays) then that counts as the market quiescing. I plan to add comments warning us as we approach the end of the window and plan to say yes to requests to temporarily lengthen the window (assuming they're based on real-world reasons like vacations).
PS: The official Schelling Point is 95%. Or oscillating between 94% and 95%.
๐ Top traders
@jack said in a comment below, '50% is clearly the correct quiescence price and Schelling point. Any other price makes it easier to force the market to move.' which sounded right at the time.
But if you could expect a high chance of someone who lost out from the market destroying it, then I'm not sure this is right. Moving the market to 50% after its having gone higher is then equivalent to N/A, and everyone getting nothing. Whereas at least in a game that can be positive sum for the traders (which I think this is?) 95% can be got to without anyone losing out and having an incentive to zero everything. i.e. Wouldn't Jack have done better by participating in pushing the value to 95% and getting a small payout than by pushing it to 50% and thus getting nothing?
I agree things are more complicated if you don't believe anyone else will have the money to oppose you, and that that is more likely to be true at 50%, where the most money would be needed. But in reality, I'm not sure how much you should expect this.
In sum, while this market demonstrated that such markets are a mess and will not necessarily help you find the truth, I remain unsure what the equilibrium is in a market like this composed of perfect economic agents intent on maximizing แน.
@KatjaGrace Yeah, there are definitely some complicated market dynamics here. Sure, picking 90% or 80% or something would give others less incentive to break the quiescence. But it also would have been easier for them to push the price down from there. At 90%, the YES holders still stood to lose some mana, and could easily have broken quiescence by buying NO with the funds they already had available, so I'm pretty confident that wouldn't have worked.
Another note is even 50% isn't the most defensible price, because a lot of other people held YES shares, which means they could in theory push the price down by selling those shares in addition to buying NO, more easily than pushing the price up. That's one reason I realized that 50% is not the ideal quiescence point and why we ended up adjusting the price to 40%; of course the other reason was more potential profits.
I agree things are more complicated if you don't believe anyone else will have the money to oppose you, and that that is more likely to be true at 50%, where the most money would be needed. But in reality, I'm not sure how much you should expect this.
I don't think this is true - picking a price near 50% is motivated specifically by the belief that others have a solid chance of putting together enough funds to contest the quiescence.
In fact, I predicted >50% chance of it on the derivative market https://manifold.markets/Yev/will-the-biden-quiescence-market-re-5fd04f2244bf, and made a tidy profit as a result ๐
If my estimate of the funds available to the opposition was much lower, then it would be even more profitable to go for a lower price e.g. 20%.
Wouldn't Jack have done better by participating in pushing the value to 95% and getting a small payout than by pushing it to 50% and thus getting nothing?
Targeting 95% would be interesting in a different way - the market was below 95% almost all the time so that would actually mean pushing the price up, and there would be someone else who could profit by pushing it down in opposition. (If I didn't do the NO bet, there were a couple other people who very well might have - and in fact I had been expecting one of them to do it before me.)
I remain unsure what the equilibrium is in a market like this composed of perfect economic agents intent on maximizing แน.
Yeah, I'm not sure either, but from my experience here and on other similar markets, I think the game largely is played outside the market itself, because it revolves around a) controlling large amounts of funds, possibly via building a coalition with other players, and b) deceiving other players about the amount of funds you control to bait them into making unprofitable bets against you.
Also, if we ignore extracting the AMM liquidity from the market, is there any reason to believe there's a Nash equilibrium other than "nobody bets"? For anyone who doesn't believe they can do the above better than the other players, the best move is not to play. And if they don't play, then it's harder for everyone else to profit - so there should be strong adverse selection effects against anyone trying to trade.
Well that was exciting! Huge thanks to @KatjaGrace who did almost all the work in preventing the manipulators from getting the market to resolve at 40%! But also kudos to the manipulators -- mainly @jack -- who proved the point that this variant does not in fact fix the problem in the previous auto-resolve-with-quiescence experiment.
For the question of whether one more patch could work, where the quiescence criteria are hypersensitive so the market only resolves if everyone agrees, @jack has convinced me it doesn't work. It might happen to work for dummy questions like Biden being president but all of this only matters for real questions with real disagreement and that means hypersensitive quiescence criteria just guarantees no quiescence. Disagreement means pulling the price in different directions, after all. So if it's very predictable that the market will resolve N/A then people won't invest resources to make the price be right, whatever they think "right" means. That defeats the point of the prediction market. Removing the incentive for manipulation in an auto-resolving market also removes the incentive to make the market reflect the truth.
I'm not fully convinced of that -- maybe there are real-world conditions in which the chances of manipulation are plenty low -- but, well, this experiment (and especially discussions with @jack about it) increased my understanding of the limitations by a lot.
Thanks everyone!
Thanks all for a very interesting and exciting market!
My main point is that the market resolution needs to have some tie to the actual question in order for the market to function correctly. (See my previous comment https://manifold.markets/dreev/biden-quiescence#xpULTrgpj4AAxnzI1ERO for a list of mechanisms that do that.)
And for anyone who is writing self-resolving markets anyway, I think this experiment does give some interesting insight into at least avoiding last-minute price manipulation - i.e. ensuring that the resolution process takes place over a span of time to give the participants time to react, trade, and influence the price. I still believe methods like randomizing the close time work well here - it has most of the benefits of quiescence, without the biggest drawbacks. I think the biggest problem with the quiescence criteria that have been used so far are that they either can resolve N/A too easily, or they can take way too long to quiescence. There are probably variations on the quiescence criteria that could work better e.g. expanding the quiescence threshold gradually over time. (Again, this only addresses the smaller problem of last-minute manipulation, not the broader problem of manipulation in general, but at least it tends to arrive at a somewhat more stable equilibrium.)
Also check out my updated post https://manifold.markets/group/selfresolving/about with my suggestions on what works and what doesn't.
This market has been incredibly entertaining. Thank you to sane people and market manipulators alike for making this possible!
@OptimizationProcess Agreed, thanks all!
And sorry to those of you who bet no on quiescence on the derivative market haha ๐
Ok, it's the final quiescence period so two possible outcomes:
The limit order wall at 41% holds till Wednesday and market resolves at 41%
All of the Biden-believers collectively have like M$100k and we break through and the market instantly resolves N/A
Again, there's no harm in putting your whole balance on YES at this point, because either we succeed and get the N/A or we fail and any shares bought now cash out at the same price you paid for them.
As I've said before on these types of markets, I want to identify and showcase vulnerable market mechanisms so that people don't rely on them for something that's actually important.
So far I believe these are the most promising methods instead of self-resolving markets:
Resolving to the result of a poll - this is a much safer and more robust method. While they aren't perfect, polls tend to work a lot better at getting a reasonable result and being mostly (but not 100%) robust to market manipulation. Examples: https://manifold.markets/SneakySly/at-the-end-of-2023-will-manifold-us and https://manifold.markets/jack/will-we-believe-sbf-committed-willf
Some random chance of resolving the normal way, otherwise resolve N/A. Imagine a market predicting the result of an expensive experimental trial. This mechanism means you only have to actually run the trial some fraction of the time, and it is incentive-compatible (you can't profit on the market by manipulating it). Example: https://manifold.markets/jack/does-gdpr-require-selfserviceautoma. Downside is that profit incentives for making good predictions are correspondingly lower.
If you really want to resolve-to-mkt, you can at least have some random chance of resolving the normal way, and protections against last-minute price manipulation such as a randomized close time or some quiescence criteria. E.g. https://manifold.markets/Yev/will-biden-be-president-on-october-fb3d01633429 This is still not robust against manipulation but at least it's slightly better than the alternatives we've seen so far.
Also, if you are ok with some author subjectivity, you can say "Resolves to MKT but the author will override if it looks like market manipulation". This has empirically worked ok for many low-stakes markets, but you do have to acknowledge that it becomes very subjective. The line between voting your beliefs and manipulating the market can be very blurry.
@jack What about a stricter definition of quiescence? I keep thinking one more patch to this kind of approach will finally work. Maybe eventually it will?
@AlexRockwell I don't think so. Yev or Jack would have bought a bunch of NO every 48 hours, on the hour. Then they would have sprung the exact same ambush when the deadline neared.
@MichaelWheatley What if (as in the original quiescence criteria that I stupidly agreed to change) the price had to round to the same integer for 48 hours? My probably-still-naive conjecture is that in that case there's no way to force quiescence and so any manipulation attempts would prevent quiescence and so no manipulation is attempted and the price just goes to something reasonable.
@dreev I think in that case, you'd get people speculatively inching the price toward NO in the hopes that their opponents get bored and give up before they do. They do, can prevent quiescence if things don't go their way. So nothing this egregious, but definitely not 99% either.
@dreev That's pretty much what I was doing before I saw what Jack had been planning.
@dreev I was with you up until "so any manipulation attempts would prevent quiescence". But IMO that just means that anyone who wants to prevent quiescence would attempt to manipulate the market, and so the market would never quiesce.
@dreev Thinking about it some more, it would be so easy to prevent such a market from resolving that it may as well say "Resolves to N/A." I bet you could get pretty good answers there, but by removing any profit incentive, you're forgoing a big part of what makes prediction markets useful. On a difficult question, no-one is incentivized to do any research or surface any new facts.
@dreev Yeah, Yev and I suggested that change right from the start because requiring it to round to the same whole number clearly doesn't work. In any market, someone will have lost mana, and they always do better by forcing n/a resolution to undo their losses. In any realistic market people are disagreeing, and the whole point of the market is to average their information. so rationally you should expect all such markets to fail to quiesce.
Also, more generally, my argument all along has been that resolve-to-mkt is fundamentally subject to price manipulation. The resolution price is determined essentially as the average of the "predictions" of the traders weighted by how much funds they invest. That's also true for prediction markets in general, but in normal markets you make predictions about the question, while in resolve-to-mkt you're just making predictions about what the final market price will be. (My comments in https://manifold.markets/jack/will-biden-be-president-on-915-reso talked about this a lot)
All the quiescence and Poisson mechanisms do is address the smaller problem of last-minute price manipulation - it at least ensures that everyone has some time trade and have price input on the market resolution. It does nothing about the fact that the market is fundamentally asking a different question (about the final market price) than the one you actually want to ask (about real things in the real world).
Ok, here's the plan! In the final quiescence period (noon PST Monday to noon PST Wednesday) anyone who would lose mana if the market resolves to PROB at 50% (including me, big time) might as well dump all their mana on YES. Either we succeed in pushing the price to 52% and the market resolves N/A and we all get all our money back, or we fail to break through the limit order and the shares we buy in that period cash out at the same price we bought them at.
To repeat, if you don't want the market to resolve to PROB at 50%, dump all your mana on YES starting at noon PST on Monday.
Even individually, that has positive expected value for anyone who would lose money on resolve-to-PROB at 50%.
@dreev "(including me, big time)"
I don't see you in the Users tab. It looks like you already cashed out?
@MichaelWheatley Yeah, I figured I should gather as much cash as I can to try to break through the limit order wall. To be clear, I've lost a lot of mana on this market already so now I just want it to resolve N/A so I can recover it.
@dreev Oh right. I always forget that "realized profits" and "realized losses" aren't actually realized until the market resolves to something other than NA.
@XComhghall It undoes every transaction in the market. So even if you've sold your shares at a loss, you can still recover everything.
@dreev I second this proposal. Please just announce that you will resolve the market to yes. We will readily buy yes and make it 95% as you wished.
@XComhghall That would count as a mis-resolution since being auto-resolving was the whole point of this market.
Clearly much scamming is occuring, but I cant tell what the scam is :D
The scam is how the market was irrationally trading in the 90%s for so long. 50% is clearly the correct quiescence price and Schelling point. Any other price makes it easier to force the market to move.
@jack i guess i'll object to it on the grounds that it looks sus to anyone who doesn't think through why it shouldn't matter, and it scares people off from bothering to try to break through the limit orders
@dreev Is it wrong in this context to do things that look suss?
Incidentally, I'd potentially participate in a coalition.
@jack Sounds legit. (Though curious whyโare you trying to contain potentially massive losses to secondary account so they don't affect you in the case you get wrecked here?)
@KatjaGrace That is part of my thinking, not the only thing - as I said, cash management was the main reason (I can explain in more detail what that means later).
I'm not sure there's a consensus on whether using multiple accounts to contain losses is allowed in a situation like this, but I think it is when you are executing fundamentally different trading strategies on the accounts and therefore having them track profit and loss separately makes sense. I have asked about similar scenarios before and founders said it was probably allowed within reason.
Anyway, I've cancelled the orders on my second account for now while we discuss/decide. This is completely tangential to the market.
@jack Methinks it makes sense and is perfectly appropriate for you to use two accounts in this market. When you use one account and your YES and NO shares cancel out, I think you are faced with a 1% loss.
@jack 'intentionally doing things that "look sus but aren't actually sus" has real downsides for the community: it makes it harder for everyone to detect people who are doing genuinely suspicious things. I don't think this is a strong reason to avoid it but it does bear considering.
@dreev I guess I think if it's legal to have two accounts, then people should go for it. But I tentatively don't think it should be legal, because then e.g. you can start with eight accounts, take very big bets in each direction on three markets, then identify yourself with the winning one and ignore the others, and so get cred for being a good forecaster, when you are no better than chance.
Relevant data: in https://manifold.markets/jack/will-biden-be-president-on-915-reso several of the market participants, including a Manifold cofounder, used alt accounts to trade on the market, and I believe that was fine. The main reasons for using alt accounts were 1) memes, 2) obfuscating identities and funds, 3) using a separate account for bot trading, 4) partitioning cash and trading - e.g. to limit the funds deployed on a given strategy, or "predicting" with one account and "manipulating" with another account. What I'm doing here isn't different and is just as ok.
@Forrest A couple counterpoints: 1) this type of market is a game where I believe the participants have agreed that deception, manipulation, etc are allowed in a way that might be a bit more frowned on in "real" markets. 2) By "looks sus" I mostly means I am intentionally trying to obfuscate and confuse, because that's part of the game in markets like this. Like I said, I don't think there's actually anything weird about this. It's pretty normal for people to use multiple accounts for many reasons.
e.g. you can start with eight accounts, take very big bets in each direction on three markets, then identify yourself with the winning one and ignore the others, and so get cred for being a good forecaster, when you are no better than chance.
I definitely agree with this concern. I haven't seen it happen in practice to my knowledge, but it's probably only a matter of time before someone does this. (It's something that happens all the time with mutual funds etc.) But this isn't what's happening here, and there are many ways to use multiple accounts that are not like this; I think it will generally be a spectrum of how allowable such things are. I asked about this type concern in discord, with the context that I was thinking of testing a specific new trading strategy that would some big bets in the opposite direction of the bets I was already making - the Manifold team said it was probably fine "within reason" - I'd probably say that if the motivation is coming from truly different strategies, that's fine, but if the motivation is just to throw different trades at the wall and see what sticks, that's not fine.
Oh also I forgot to mention, in reply to "if it's legal to have two accounts": it is explicitly allowed to have multiple accounts (https://help.manifold.markets/community-guidelines), but it's not allowed to abuse/exploit it - what counts as abuse is not always 100% clear of course, but abusing it to get free mana is definitely not allowed.
Sounds like the conclusion on alt accounts is that it's not super relevant here but those using them are happy to refrain for the sake of everyone's peace of mind.
The probability was 90% at 11/22 12 a.m. PT
Starting at 11/22 9 a.m., the closing time should be 11/25 9 a.m., skipping Thanksgiving on 11/24?
@XComhghall For the official quiescence criteria we went with noon to noon two days later. And the price was oscillating between 89% and 90% for the last two days but just hit 91%. So if it stays at 90-91 or 91-92 from noon today to noon on noon Tuesday (since Thursday and Friday are holidays) then that will count as quiescence. Otherwise noon Monday to noon Wednesday will work. I'm still hoping to see the price stabilize at 95%.
@dreev The band to 'quiesce' is way too small imo. It should be at least 5%. Also didnt it already trigger yesterday? I saw it was closing in a few hours and thought it was finally happening.
@AlexRockwell Not unreasonable but two consecutive integer percents for two business days, noon to noon, is what we agreed on so I wouldn't change it unless it were unanimous.
@dreev I think if you try this method again, it might work if the band to close it was a lot wider, or alternately that it would resolve to yes if probability stayed above 50% or no if below 50% for X period of time (only resetting if it crossed 50%). Manipulations to prevent it from closing would be more expensive if that were the case. Its too easy to move it by 1-2% for almost no money.
@dreev I thought you meant noon to noon, 10 a.m. to 10 a.m., 4 p.m. to 4 p.m., etc. two business days later would all count as quiescence. Oscillating between consecutive integer percents is not staying the same to the nearest whole percentage point -- Manifold automatically rounds to the nearest whole percentage point. However, that is what you said 2 months ago, I'll respect it.
@XComhghall Ah, yeah, reasonable interpretation but I guess in light of ambiguity we should go with the version that yields longer quiescence time. Also the arbitrary time version is hard to keep track of.
And yes to the change from "same rounded percent" to allowing oscillating. Sounds like everyone is ok with that change, since it happened when the market was still brand new? Maybe I should edit the description more to mitigate confusion.
@dreev If the market moves by more than 2 pp after 12 p.m. Monday, will you close the market and resolve to N/A right away, or wait until 12 p.m. Wednesday to resolve it as N/A?
I left this market mostly alone for the last month to wait and see what people would do, and I'm confused by the trading here. Clearly 50% is the most viable quiescence point. Why would you trade at 90% when it costs 1/10 as much for someone to force the market to move there? Clearly 50% is the only viable Schelling point lol.
I created a market that will not close until it fully quiesces (no N/A resolution):
Was Trump in prison on 11/15/2022? (Resolve to quiescent market price)
M260.69 to 85%
M1,929.57 to 80%
M2,908.90 to 50%
Then the Schelling point will be reached!
Looks like we need M$736 on NO to break through the limit orders down to 85%. I'll put in half of that if any of y'all want to commit the other half.
Looks like we need M$1896 on YES to break through these limit orders. I'll put in half of that if any of y'all want to commit the other half.
Proposed Schelling point: the current price, 88. Let's just leave it there otherwise I feel like this is never gonna quiesce...
Too low! I just updated the description with an Official Schelling Point.
@AlexRockwell Well, it creates common knowledge, in the technical sense (everybody knows and everybody knows that everybody knows and everybody knows that every... etc). And with common knowledge of where we expect the price to go, that becomes self-reinforcing and self-fulfilling. In theory.
After thinking about this closing method more, I think it doesnt work well, but that a better method would be that after a certain date, the market would resolve Yes if the probability was above X% (something above 50%, maybe 75?), or resolve No if the probability was below Y (25%?), for some consecutive length of time (2 days?)
The 1-2% probability band is too narrow, and its too easy for the price to keep fluctuating at some level by more than 1-2%, but still be solidly yes or no the whole time.
@AlexRockwell Very similar to that method has been tried already and didn't work any better for producing the "true" result: https://manifold.markets/NicholasCharette73b6/will-biden-be-president-on-october
I dont think you should close it N/A at a certain time. Just keep letting it try to reach a stable outcome.
@AlexRockwell I think I'm committed to the protocol at this point. Feel free to try a version that stays open however long it takes to quiesce. I think with liquidity fees, that would work. Eventually it would get too expensive to keep playing tug-o-war. Without liquidity fees, as in this market, it's plausible that the tug-o-war could go for ... years? I don't know. If Manifold's loan feature were more expensive that's another way that an indefinite tug-o-war could eventually get too expensive for traders to sustain.
Musing: If we do find some variant of auto-resolution that actually works, even if it involves a painfully long quiescence period, that may imply a version that works with a non-painful quiescence period. Because traders would do the backward induction and not get in these dumb tug-o-wars in the first place and the market might actually just converge to the Schelling point? Hopeful-face?
Btw, Friday is a federal holiday in the US so not a business day. I continue to update the close date to the soonest the market can close.
Wow, actually, this might actually work, I lost quite a bit of money destroying the market. I think it's worth spending some mana to point out flaws, but it might be resilient in the long term.
Good work! Thanks for the lovely chart and beautiful fluctuation.
Here's an alternative system that avoids the indefinite delaying issue and seems harder to manipulate. One downside is that it doesn't weight the opinions of better predictors any more heavily than other traders.
'If we go all the way till November'
November 1?
The question is 'at the end of October', and you only give 1 day for it to quiesce?
Payout_Y = (1 - p) / p * M + M
Payout_N = p / (1 - p) * M + M
Payout_Y, payout of buying yes
Payout_N, payout of buying no
p, probability, chance (roughly the average of the current and new probability)
M, amount of mana invested
For example, at a probability of 95%,
Payout_N = .95 / (1 - .95) * M + M
= 95 / 5 * M + M
= 19 M + M
= 20 M
So for every mana I invest in no, the payout is 20, and I own 20 no shares.
The probability is, I think, calculated based on the number of yes and no shares, not the amount of mana invested in each.
When p is very large, e.g., 99%,
Payout_Y = 1 / 99 * M + M = 1.0101010101 M
Payout_N = 99 / 1 * M + M = 100 M
Every mana invested in no is 'equivalent' to nearly 100 mana invested in yes.
I have to buy M$100 of yes to cancel out M$1 of no.
What if p = 99.9%?
Payout_Y = 1 / 999 * M + M = 1.001001001 M
Payout_N = 999 / 1 * M + M = 1,000 M
M$1 no = M$1,000 yes
So naturally, traders are incentivized to to buy no when the probability is high, and to buy yes when the probability is low.
On the other hand, the payout of yes when p is high is really low, so traders may not want to buy yes at all โ There is little to gain anyway.
I do not think the end date has a large effect, or should have an effect at all. In fact, I think any market could be manipulated in this manner before the close / resolve date.
https://manifold.markets/zzq/will-biden-still-be-president-at-th has a 1/20 or 5% risk for no traders. I lament the fact the people are not manipulating this market. The expected value and risk aversion can be factored in. 98% is unreasonably high.
