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Marriage Prediction Market

File this under the list of things which are probably practical but also somewhat offensive and not easily implementable but fun to discuss anywaysmarriage futures.

Prediction markets allow the application of market forces to make general predictions. Take the example of the Bush v. Kerry election — InTrade allowed individuals to buy and sell what are essentially “shares” (in a stocks sense) of Bush or Kerry winning the election. The basic idea is that the stock will pay out $10 if Bush wins, and $0 if Kerry wins, but that the shares cost money to buy. Thanks to investors buying and selling, the price of the “share” will thus fluctuate depending on what the market thinks is the actual probability of Bush or Kerry winning. If it is priced at $5, then the market believes there’s a 50% chance that Bush will win. If it is priced at $9.90, then the market believes that there’s a 99% chance that Bush will win.

These markets have been applied by InTrade to make (fairly accurate) predictions on political events and have even been applied by companies such as Hewlett Packard to improve forecasting and product development.

A quick look will show that these can be applied to just about anything — maybe even predicting how long a marriage will last? I’m not quite sure how this would work — but the gist of the idea I got is that for a new couple about to get married, friends and loved ones would implement a prediction market, whereby an appreciating asset (say money in a bank, or a bond, or a stock or annuity or something) would pay off after 50 years or at the divorce proceeding. People would then buy/sell the asset. For simplicity’s sake, lets say the asset is currently worth $10, and will be appreciate by $1 every year. If the going price is $15, then the “market” believes the marriage will only last 5 years. If the going price is $40, then the market believes that the marriage will last 30 years.

Now if the market is run anonymously, then this would be an effective way to communicate to an engaged (or thinking about it) couple on what everyone believes is the prospects of their marriage without having to tell them on a personal basis. This can help inform friends/loved ones (how nice of a gift to buy) as well as the couple themselves (should they get married).

What becomes interesting are the theoretical implications — will people who are shorting try to sabotage the marriage? Will people who have them in the long haul try to force the couple to stay together?

Would anyone be dorky enough and have friends open enough to do this?

Published in Blog

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