Electability
According to Intrade.com, the price of a contract which pays $100 if Mike Huckabee wins the Republican nomination is $13.20 and the price of a contract which pays $100 if he wins the Presidency is $4.50. That means the market sees Huckabee as having a 13.2%
chance of winning the nomination and a 4.5% chance of winning the Presidency.
The simple probability formula Prob(Event A given Event B) = Prob(Event A and Event B)/Prob(Event B) implies that the market sees the probability of Huckabee winning the election (Event A) given he wins the nomination (Event B) as .045/.132 = .34, or a 34% chance of winning given he's nominated.
For Mitt Romney, Prob of Nomination = .183, Prob of Election = .061, thus Prob of Election given nomination = .33.
Thus both Huckabee and Romney are about the same electability.
For Guiliani, Prob of Nomination = .198, Prob of Election = .081, thus Prob of Election given nomination = .41.
For McCain, Prob of Nomination = .386, Prob of Election = .161, thus Prob of Election given nomination = .42.
That is, the markets, people trading with real money, think that McCain and Guiliani are more electable, and by a half decent amount.
In this election, having a 42% chance of winning is about all we can hope for.
chance of winning the nomination and a 4.5% chance of winning the Presidency.
The simple probability formula Prob(Event A given Event B) = Prob(Event A and Event B)/Prob(Event B) implies that the market sees the probability of Huckabee winning the election (Event A) given he wins the nomination (Event B) as .045/.132 = .34, or a 34% chance of winning given he's nominated.
For Mitt Romney, Prob of Nomination = .183, Prob of Election = .061, thus Prob of Election given nomination = .33.
Thus both Huckabee and Romney are about the same electability.
For Guiliani, Prob of Nomination = .198, Prob of Election = .081, thus Prob of Election given nomination = .41.
For McCain, Prob of Nomination = .386, Prob of Election = .161, thus Prob of Election given nomination = .42.
That is, the markets, people trading with real money, think that McCain and Guiliani are more electable, and by a half decent amount.
In this election, having a 42% chance of winning is about all we can hope for.
posted by Harsh Pencil | 1/17/2008 04:13:00 PM
For a contingent probability computation, how about making sure every assignment of probability of presidency was conditioned upon a probability of nomination. If Intrade markets only exist for mutually exclusive events, parsing data in each market for traders particating in both markets may lead to a different result.
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