But not anymore.

If #InternetParty won't poll 5+% before ballot papers are printed we'll self destruct & put our weight behind a party adopting our policies.We now have a ridiculously complicated contract. Here's what you're trading on, if you're buying this contract.

— Kim Dotcom (@KimDotcom) February 10, 2014

- The probability that DotCom actually forms a party (which I'd reckoned at 80% prior to this);
- The probability that DotCom is serious about the tweet (75%?);
- The probability that the Internet Party could poll above 5% prior to the deadline (which I put at even odds IF we get substantial GCSB Snowden revelations during the campaign);
- The expected vote share on election day. This expected vote share is:
- Zero if either of {No party, serious * less than 5%} obtain
- The vote share conditional on polling above 5% and conditional on DotCom being serious.

So, what the hell should you pay for a contract that pays $0.10 for every 1% of the vote earned by the yet-to-be-formed Kim DotCom Internet Party?

Let's label a few terms and make a few guesses.

*Pp*is the probability that there is a Party, say 0.8.*Ps*is the probability that DotCom really would kill the party if it doesn't poll 5% prior to the election, say 0.75*Vh*is the expected vote share conditional on a poll result of 5% prior to the deadline- This one's hard to ballpark. You could make an argument for pegging it lower than 5% because a single outlier poll could be sufficient for his going ahead. But I expect that the state of the world in which he can get a single >5% figure is the state of the world in which we've had substantial GCSB revelations affecting NZ; in that state of the world, I'd put even odds on 5%. And so I'll stick it at 5, or $0.50 in iPredict prices.
*Vl*is the expected vote share conditional on no polling result of 5% prior to the deadline.- I'll peg this at 0.5%. If he goes ahead despite no polling result above 5%, credibility's shot. And it's also the state of the world in which there's no substantial GCSB revelations. So $0.05 in iPredict prices.
*Pt*is the probability that the Internet Party polls at least 5% prior to the deadline.- I'll peg this at at even odds IF we get substantial GCSB revelations during the election campaign, and nil otherwise. Supposing even odds on substantial revelations, that gives us 25%.

The expected value of the contract is then:

*Pp**[[

*Ps**[(

*Pt*Vh*)+((1-

*Pt*)*0)]+[(1-

*Ps*)*[(

*Pt*Vh*)+((1-

*Pt*)*

*Vl*)]]]

Using my rough ballpark estimates, that's then:

0.8*[[0.75*((0.25*$0.5)+0)]+[0.25*[0.25*$0.5+0.75*$0.05]]]

= 0.8*($0.09375+.25*$0.04375)

= 0.8*$0.1375

= $0.11

Would you not be better advised to hedge your prior (foolish) bets against me and Heffernan?

ReplyDeleteStakes with you and Heffernan aren't high enough to warrant it.

ReplyDeleteAmusing that all of this comes from a Twitter conversation that started with the observation that making predictions about the Internet Party is probably a fool's errand. (I note that my prediction - farce - seems to be holding up pretty well.)

ReplyDeleteI didn't bet against you on farce.

ReplyDeleteMy reasoning: gcsb revelations increase attention for the party, increasing chance of farce over and above (very high) baseline. Such farce in turn punished by voters.

ReplyDeleteAt the margins they're at, doubt it'd have much effect.

ReplyDeletelooking to lose the terrible Vodafone Telstra down line,who cheat youat the level of your house phone, very expansive, as well as very expensive:

ReplyDeleteand well I thinking Mr DotCom Orcon

Check it out for youself dudes Gewtrman prices.