Strategic Coordination in Forecasting. An Experimental Study

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. poor performances of prediction markets as resulting from the distinct incentives that forecasters face. While this notion has been considered theoretically and empirically, the underlying behavioral working mechanisms have not yet been described. We thus put forth an exploratory experiment on the emergence and robustness of coordination in a forecasting setting implementing contradictory incentives for accurate forecasts and coordination. Terms of use: Documents inForecasts are shown to be inaccurate and biased toward current values. This in turn has subjects aiming at coordination benefits. Predominantly, coordination is achieved through the risk-dominant equilibrium as the game proceeds. Once established, coordination is fairly stable and adds to overall welfare. Our results support the assumption of rational herding as a driving force for predictions of poor accuracy that are systematically biased towards focal points.

Categorization and coordination

“…The idea that professional forecasters (e.g. equity researchers) may want to have their predictions coordinated with others' due to reputation concerns has been put forward in various papers in finance (Scharfstein and Stein, 1990;Bizer et al, 2014). The same argument applies also to product reviewers, for example, on websites reviewing products for the entertainment industry; see e.g.…”