LMSR vs baysian vs other market maker

[zack]

It looks like there are a lot of different kinds of market makers. Would there ever be a reason to implement a Bayesian version of truthcoin? Or some other type of market maker?

this caught my attention http://www.cse.wustl.edu/~allenlavoie/papers/bmm.pdf

[psztorc]

Yes, if it were better.

Regarding the paper you've found:

One caveat is that, unlike LMSR, BMM is not loss bounded. Another is that it is not as simple to extend BMM to combinatorial markets.

Those seem like major drawbacks, don't they?

[somnicule]

BMM has some interesting benefits, but they do not outweigh the costs.

I came across the same paper when I was considering experimentation with the liquidity-sensitive version of LMSR, but its utter failure to respond to market shocks as demonstrated here definitely put me off. LMSR has a lot of desirable properties, and with good trading interfaces its shortcomings are well worth the benefits it offers with regards to bounded loss, multidimensionality, etc.