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You may be interested in "Do Morons Make Prediction Markets More Accurate?" - https://nicholasdecker.substack.com/p/do-morons-make-predict...

Essentially the argument is that more dumb money in a prediction market provides an even stronger incentive for smart money to join, moving the price back to an accurate probability.

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Isn't the smart money incentive there because the market is wrong?

That also seems to assume that there’s enough smart money (and smart information) to balance things out. I’m not sure about that.

In a larger market, traders can make money off smaller price discrepancies.

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