Suppose we want to predict the probability of some future event. We can set up a prediction market where people trade binary options that pay $1 if the event occurs and $0 if it doesn't. The market price is then a good estimate for the probability of the event.
But what if we're interested in predicting a real-valued random variable X rather than a binary-valued one? I propose setting up a prediction market where people trade binary options of the form "X will be less than x" for arbitary x. It seems this would yield a good estimate for the *full* probability distribution (more precisely, …