License: Creative Commons Attribution 3.0 Unported license (CC BY 3.0)
When quoting this document, please refer to the following
DOI: 10.4230/LIPIcs.ITCS.2018.14
URN: urn:nbn:de:0030-drops-83191
URL: http://dagstuhl.sunsite.rwth-aachen.de/volltexte/2018/8319/
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Kong, Yuqing ; Schoenebeck, Grant

Optimizing Bayesian Information Revelation Strategy in Prediction Markets: the Alice Bob Alice Case

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LIPIcs-ITCS-2018-14.pdf (3 MB)

Abstract

Prediction markets provide a unique and compelling way to sell and aggregate information, yet a good understanding of optimal strategies for agents participating in such markets remains elusive. To model this complex setting, prior work proposes a three stages game called the Alice Bob Alice (A-B-A) game - Alice participates in the market first, then Bob joins, and then Alice has a chance to participate again. While prior work has made progress in classifying the optimal strategy for certain interesting edge cases, it remained an open question to calculate Alice's best strategy in the A-B-A game for a general information structure.

In this paper, we analyze the A-B-A game for a general information structure and (1) show a "revelation-principle" style result: it is enough for Alice to use her private signal space as her announced signal space, that is, Alice cannot gain more by revealing her information more "finely"; (2) provide a FPTAS to compute the optimal information revelation strategy with additive error when Alice's information is a signal from a constant-sized set; (3) show that sometimes it is better for Alice to reveal partial information in the first stage even if Alice's information is a single binary bit.

BibTeX - Entry

@InProceedings{kong_et_al:LIPIcs:2018:8319,
  author =	{Yuqing Kong and Grant Schoenebeck},
  title =	{{Optimizing Bayesian Information Revelation Strategy in Prediction Markets: the Alice Bob Alice Case}},
  booktitle =	{9th Innovations in Theoretical Computer Science Conference (ITCS 2018)},
  pages =	{14:1--14:20},
  series =	{Leibniz International Proceedings in Informatics (LIPIcs)},
  ISBN =	{978-3-95977-060-6},
  ISSN =	{1868-8969},
  year =	{2018},
  volume =	{94},
  editor =	{Anna R. Karlin},
  publisher =	{Schloss Dagstuhl--Leibniz-Zentrum fuer Informatik},
  address =	{Dagstuhl, Germany},
  URL =		{http://drops.dagstuhl.de/opus/volltexte/2018/8319},
  URN =		{urn:nbn:de:0030-drops-83191},
  doi =		{10.4230/LIPIcs.ITCS.2018.14},
  annote =	{Keywords: prediction market, information revelation, optimization}
}

Keywords: prediction market, information revelation, optimization
Collection: 9th Innovations in Theoretical Computer Science Conference (ITCS 2018)
Issue Date: 2018
Date of publication: 12.01.2018

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