Modules / Module 03

Game Theory & Economic Incentives

Why traders behave the way they do—and how markets stay honest

Explore manipulation costs, arbitrage across platforms and contracts, herd behavior, news-driven price jumps, and the incentives that keep prediction markets aligned with truth.

Chapters

  1. Introduction to Game Theory for Prediction Markets
  2. The Cost of Manipulation: Why Pump-and-Dump Fails
  3. Arbitrage: The Market's Self-Correction Mechanism
  4. Cross-Market Arbitrage (Polymarket vs. Kalshi vs. PredictIt)
  5. Cross-Contract Arbitrage (Yes/No and Parent-Child Events)
  6. Structural Arbitrage: Inconsistent Probability Trees
  7. Information Cascades and Herd Behavior
  8. How News Events Trigger Instant Price Jumps
  9. Incentivized Reporting and Honest Consensus