Is Positive News from Intrade a Good Use of Campaign Resources?

I wrote a post last week about the link between the cost of an “Obama wins” futures contract on Intrade and Nate Silver’s 538 blog’s probability of an Obama victory. At the time, the two had converged almost perfectly. Since then, however, a gap has opened up between the two: Silver’s model now gives Obama a 70% chance of winning, but Intrade is down to a 57% chance (and, interestingly enough, Intrade has gone down 3% since Obama “won” last night’s debate.)

A Monkey Cage reader also noticed this divergence and emailed me with three possibilities that could be explaining it:

1. The traders really aren’t paying attention that much attention to 538 and the recent congruence was just a fluke;

2. Romney supporters are deliberately trying to cause a run on Romney; or

3. Traders are buying into the Romney “momentum” idea and ignoring polling averages (which relates back to #1, but is a bit different in that they’re not ignoring 538, but they think things are going to change in the next two weeks).


Upon reading his email, my best guess was that the answer was #1, and that I had just picked a day that these two estimates (which are basically different ways of trying to uncover the same “true” reality) had randomly converged. Given the number of days in the months leading up to the election, it was probably inevitable these two estimates would converge at some point.

But then I saw this piece from Jonathan Chait. Chait claims:

In recent days, the vibe emanating from Mitt Romney’s campaign has grown downright giddy. Despite a lack of any evident positive momentum over the last week — indeed, in the face of a slight decline from its post-Denver high — the Romney camp is suddenly bursting with talk that it will not only win but win handily. (“We’re going to win,” said one of the former Massachusetts governor’s closest advisers. “Seriously, 305 electoral votes.”)

This is a bluff. Romney is carefully attempting to project an atmosphere of momentum, in the hopes of winning positive media coverage and, thus, creating a self-fulfilling prophecy.

Now, I have no idea if Chait is correct. But if he is correct, then it seems that flooding the Intrade market with cheap futures contracts on an Obama victory would be an incredibly cost-efficient way to continue to fead a narrative of Romney gaining momentum. From eyeballing the chart on Intrade, it looks like the number of contracts changing hands daily is in the thousands, not the tens of thousands. So this seems like something that is doable, although I wonder whether it would be traceable?

Again, I have no evidence at all that this is occurring. But the idea is intriguing. For you campaign advertising people out there: at what level of exposure would this kind of “buy” be worthwhile? The following data from Google Trends certainly suggests that more people pay attention to Intrade during US presidential elections, which suggests at least some payoff to trying to have a positive narrative coming out of the Intrade data:

Thoughts?

11 Responses to Is Positive News from Intrade a Good Use of Campaign Resources?

  1. Chris October 23, 2012 at 4:25 pm #

    Nate Silver’s secret unspecified model and intrade diverge, and it’s *intrade* that’s you suspect of partisanship?!

    • Sebastian October 23, 2012 at 4:50 pm #

      It would certainly be cheaper to buy Intrade than to buy Nate… And while Nate’s model is unspecified it’s pretty easy to reverse engineer something very close (see e.g. Andrew towards the bottom here: http://andrewgelman.com/2012/10/is-it-meaningful-to-talk-about-a-probability-of-65-7-that-obama-will-win-the-election/ ).
      But I also don’t see that suspicion in Joshua’s post in the first place.

    • Crissa October 24, 2012 at 11:45 pm #

      Nate Silver’s secret unspecified model that he blogs about the mechanics and inputs of nearly every week? Doesn’t sound either secret or unspecified.

  2. Sebastian October 23, 2012 at 4:34 pm #

    Per MR: http://marginalrevolution.com/marginalrevolution/2012/10/intrade-manipulation-fail.html
    _if_ this is the case it would be awesome for econ and polisci grad students. Instead of grading undergrad exams, we could just make a couple of months wages by arbitraging against campaign funded intrade manipulation.

  3. dylan October 23, 2012 at 4:37 pm #

    this is made more plausible by the fact that the romney campaign has sooo much money at its disposal

  4. unpoller October 23, 2012 at 4:44 pm #

    or maybe Obama funds are lowering

  5. K. October 23, 2012 at 4:52 pm #

    The Atlantic wrote about Intrade manipulation earlier today:
    http://www.theatlantic.com/business/archive/2012/10/should-presidential-campaigns-spend-more-money-manipulating-intrade/264000/

    • Joshua Tucker October 23, 2012 at 5:27 pm #

      Wow – I had no idea about the Atlantic piece. Obviously would have referred to it directly (and probably would have written a very different post) if I knew it was out there. For now I’ll just take it as confirmation that the idea is an intriguing one…

      • Sebastian October 23, 2012 at 5:50 pm #

        the topic is “trending” if you want – there’s also the MR piece I cite above, which references a Brad Plumer piece on Wonkblog and a Tweet by Ezra Klein.

  6. Dan Hopkins October 23, 2012 at 6:59 pm #

    Intrade of course is not the only betting market–but since it is the most visible one among Americans it would be the most promising to manipulate. Right now, Intrade is at 57.0, while Betfair puts Obama’s re-election at 63.7, Pinacle puts it Iowa puts it at 61.0:

    http://sports.betfair.com/?tmi=26387070&ex=1&ti=2378961&q=2012%20election

    http://www.pinnaclesports.com/ContestCategory/Politics/300~2A~+U~2E~S~2E~+2012+Presidential+Election/Lines.aspx

    http://iemweb.biz.uiowa.edu/quotes/Pres12_quotes.html

  7. Lucas Puente October 24, 2012 at 2:33 am #

    The Romney camp betting on their candidate to win does seem like a reasonable investment given that they could change the market without incurring a large cost. However, two things to note: 1) InTrade has a documented Republican bias already so it could just be right-leaning InTrade participants driving this divergence with 538 rather than any official campaign strategy. 2) If that were the case and the Romney team was trying to drive the market in their favor, the potential costs seem to outweigh the benefits. That is, a Romney rise on InTrade but not elsewhere would only be picked up by the most plugged in of voters, seemingly not the median undecided voter in Ohio or Flordia. On the other hand, the fallout from the discovery that the campaign was directly rigging the market in its favor could be severe and end any hopes of the Romney campaign resurgence.