A Unified Framework for Dynamic Pari-Mutuel Information
Market Design: A Case of On-Line Optimization


Prof. Yinyu Ye
Stanford University

Vice Chair of the SIAM Activity Group on Optimization
Fellow of the INFORMS
Chairman of MOSEK Technical Advisory Board
Stanford Asian American Faculty of Year Award Awardee
The Farkas prize of the INFORMS Optimization Society Awardee

11:00am, Wednesday 24 June, 2009
(Preceded by Tea Reception at 10:30am)
Lecture Theatre Two, Cha Chi-Ming Science Tower,
Ho Sin Hang Campus, Hong Kong Baptist University


Recently, several pari-mutuel mechanisms have been introduced to organize prediction markets, such as the logarithmic scoring rule, the cost function formulation, and sequential convex pari-mutuel mechanism (SCPM). In this work, we develop a unified framework that bridges these seemingly unrelated models for centrally organizing contingent-claim markets. Our framework establishes necessary and sufficient conditions for designing mechanisms with many desirable properties such as proper scoring, truthful bidding (in a myopic sense), efficient computation, controllable risk-measure, and guarantees on the worst-case loss. As a result, we develop the very first proper, truthful, risk-controlled, loss-bounded, and polynomial-time scoring rule, which neither of the previous proposed mechanisms possesses simultaneously. Thus, in addition to providing a general framework that unifies and explains all the existing mechanisms, our work would be an effective and instrumental tool in designing new market mechanisms. We also discuss applications of our framework to general open markets for dynamic resource pricing and allocation. This is a joint work with Shipra Agrawal, Erick Delage, Mark Peters, Anthony So, and Zizhuo Wang.

All are welcome


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