1) is the fact that individuals that first enter into the prediction market have to purchase the stock from this issuer not incentive enough? not to mention the issuer has the same incentive as any early investor - a more substantial return on his/her investment
2) fees theoretically reduce participation in the market as players have to calculate the fee into their cost-benefit analysis of entering the market.
People will issue prediction markets regardless of fees, as they still stand to gain a lot even without them. If there should be a fee at all it should be a fee on the issuer, so as to discourage the propagation of irrelevant markets for which there will be low participation.
So which is it? People will issue prediction markets regardless of fees? Why would you have quality without a profit incentive which rewards quality? How do you increase volume and attract people in if you don't reward the people who bring you the most volume?
For example if I issue a bet on the price of BTS after the first month being above or below a certain limit, and there is a fee for all who participates, then I'm rewarded as more people participate in my prediction market. This would probably be the rational sort of people so what if I create prediction markets which don't have anything to do with rational people and ask the question of what will happen in a TV series? Suppose more people are attracted for irrational reasons than rational, doesn't it still increase volume?
By rewarding me for increasing the volume it would give me incentive to both market Bitshares the protocol and the specific bet that I'm trying to make money from. People who think they could win big won't mind paying a percentage fee to make the bet if it's designed right. You want Bitshares to reach critical mass overnight and have good marketing? Reward the people who generate the prediction markets in the first place and you'll have high quality markets.
I think there should be no rules on fees and that the issuers should be able to set their own fees which should be whatever people are willing to pay to subscribe to their broadcast.
Maybe that issuer has a website with a subscribe button and is actively marketing. Why shouldn't that issuer be rewarded more for success in bringing people into Bitshares?2) fees theoretically reduce participation in the market as players have to calculate the fee into their cost-benefit analysis of entering the market.
Robots think like this, humans do not. Gamblers don't think about the cost-benefit analysis else they wouldn't be gambling, playing the lottery, or doing most of the stuff which defies logic. So you're not dealing with the same breed as you deal with if you're talking about a stock investor. If it's not the same breed why tread it as if these two categories of users think the same?
People who gamble such as those who bet on sports do not do so for rational reasons. It would be a soccer game and they could be doing it for nationalist reasons. It could be the Olypmics and they could be doing it out of some sort of national pride. But if you want Bitshares to reach critical mass these are the sorts of users who will make up the majority in my opinion.
So if you give the issuer an incentive and the ability to profit as much as possible then you'll have the sort of magnetic hubs that attract new users. You could have betting sites which use Bitshares for example and gambling sites as well, none of which would be using cost/benefit analysis in these cases.
Now if you're talking about actual prediction markets for serious users and professional day traders then these people might want to do things differently. Institutional investors are a different category of user than what I was talking about which is why I said "betting" rather than investing.
Vigorish percentage can be defined in a way independent of the outcome of the event and of bettors' behaviors by defining it as the percentage raked in a risk-free wager. This definition is the rake of the bookie as a percentage of total bets received if the bookie has balanced the wagers so that he makes equal profit regardless of the outcome of the event.https://en.wikipedia.org/wiki/Vigorish