Prediction markets have widely emerged, especially in corporate settings. In order to overcome the perpetual problem of illiquidity, many prediction markets apply so-called automated market makers as market mechanism for trading. However, because they usually need a subsidy to work, they only have been used in play-money markets, where no real money is at stake and losses for operators cannot occur. In this paper, we analyze the only two automated market makers with upper-bounded losses and study maximum and expected subsidies. For PM operators, these amounts to subsidize markets can potentially be compared against the costs of running pure playmoney markets.
Slamka, Christian, "THE PRICE OF RUNNING LIQUID PREDICTION MARKETS" (2009). Wirtschaftsinformatik Proceedings 2009. 98.