publications

2026

1. A General Theory of Liquidity Provisioning for Prediction Markets

   Adithya Bhaskara, Elias Lindgren, Rafael M. Frongillo, and Maneesha Papireddygari

   In Proceedings of the 27th ACM Conference on Economics and Computation, to appear, Rome, Italy, 2026

   PDF and arXiv links are for a previous version of the paper.

   Abs arXiv Bib PDF

   Liquidity provisioning in automated market makers is the practice of recruiting third-party liquidity providers (LPs) to contribute assets to the market in exchange for fees skimmed off of trades. This paper introduces a general framework for liquidity provisioning in cost-function prediction markets. Our most general protocol allows LPs to submit or update an arbitrary cost function that specifies their liquidity over the entire price space. We show that our protocol encapsulates several notions of running market makers in parallel, which we prove to be equivalent. We also recover existing protocols from decentralized finance as special cases. In our protocol, liquidity can be expressed as a matrix-valued function, which we argue is necessary with three or more securities. Due to this inherent multidimensionality, the design of trading fees with more than three securities is nontrivial: we show that natural axioms on the design of these fees are incompatible.

   @inproceedings{bhaskara2026general,
     title = {A General Theory of Liquidity Provisioning for Prediction Markets},
     author = {Bhaskara, Adithya and Lindgren, Elias and Frongillo, Rafael M. and Papireddygari, Maneesha},
     booktitle = {{Proceedings of the 27th ACM Conference on Economics and Computation, to appear}},
     series = {EC'26},
     year = {2026},
     location = {Rome, Italy},
     publisher = {Association for Computing Machinery},
     address = {New York, NY, USA},
     note = {PDF and arXiv links are for a previous version of the paper.}
   }