Price as Focal Point: Prediction Markets, Conditional Reflexivity, and the Politics of Common Knowledge

Prediction markets are often treated as forecasting devices, but under specifiable conditions they also function as coordination mechanisms: public probabilities that organize the behaviour of voters, donors, journalists, traders, and institutions in self-fulfilling or self-defeating ways. Drawing on transaction-level evidence from the 2024 U.S. presidential election, this paper shows that the social force of a market signal depends on persistence, the breadth of responding trader types, and cross-platform consensus. It introduces a Signal Credibility Index that combines variance ratio, two-sidedness, and trader concentration. Across three political shocks, superficially similar events generate distinct signal types; a cross-platform comparison establishes a decoupling of social authority from epistemic robustness. The framework has direct implications for regulating prediction markets as democratic information infrastructure.