> When uncertainty increases (imagine squishing a mound of clay), you end up pushing lots of probability mass (clay) to the other side of the bet and the expectation of the payoff (used to make a price) tends towards 1/2.
This doesn't make any sense. If you think the chances of someone of getting elected is very high (eg. Putin getting re-elected), nobody will be buying shares in him losing. True, the shares of "putin loses" is dirt cheap, but that doesn't mean much if he has a high chance of getting elected.
It matters a lot what the price is of "putin loses." If Putin does in fact lose 5% of the time, but the odds are 3%, you should bet on it. It may feel silly to do that in this instance but consider what happens if you regularly bet in prediction markets. Always betting on the "putin wins" outcome loses money in the long run.
This doesn't make any sense. If you think the chances of someone of getting elected is very high (eg. Putin getting re-elected), nobody will be buying shares in him losing. True, the shares of "putin loses" is dirt cheap, but that doesn't mean much if he has a high chance of getting elected.