Suppose that, in an attempt to manipulate the Iowa Electronic Markets, several people invest large sums in contracts ...

Emil-Kunkin on May 26, 2023

Hi, this is indeed a tough question. I would start by reminding ourselves of the passages and the scenario. The first passage argues that markets are efficient and able to quickly disseminate accurate information. The second passage argues that markets are merely a better version of a poll, it reflects public opinion at that moment.

In this question, we are asked to imagine what would happen if a small group tried to artificially pump the price of a long shot candidate, which briefly rises before being corrected back to its initial price. We are then asked which passage this would support.

My initial reaction to this is that it may support A, since the correct info was quickly disseminated and the bubble disappeared quickly. With that in mind, let's see the answer choices.

A is incorrect. This scenario doesn't show that an unpopular candidate cannot have a sustained increase (one could if they actually begin to climb in the polls), and passage A never makes that claim.

B looks good, since A claims that accurate information spreads fast, which is what happens here.

C is incorrect since we have no reason to think that a temporary change tells us nothing.

D is incorrect since we don't actually know if the long shot candidate was ahead of the leaders in the scenario.

E is incorrect because the market actually briefly didn't reflect majority opinion.