PL EN


2010 | 11 | 1 | 189-198
Article title

On incentive compatible designs of forecasting contracts

Content
Title variants
Languages of publication
EN
Abstracts
EN
In the paper the optimal design of forecasting contracts in principal-agent setting is investigated. It is assumed that the principal pays the agent (the forecaster) based on an announced forecast and an event that materializes next. Such a contract is called incentive compatible if the agent maximizes her payoff when she announces her true beliefs. This paper relaxes the assumption present in earlier works on this subject that agent’s beliefs are deterministic by allowing them to be random (i.e. stemming from estimation). It is shown that for binary or nominal events the principal can learn only expected values of agent’s predictions in an incentive compatible way independent of agent’s signal space. Additionally it is proven that incentive compatible payment schemes give the agent a strictly positive incentive to improve the precision of her estimates.
Year
Volume
11
Issue
1
Pages
189-198
Physical description
Dates
published
2010
Contributors
References
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  • 3. [GR] T. Gneiting and A.E. Raftery, Strictly Proper Scoring Rules, Prediction, and Estimation, Journal of the American Statistical Association, Vol. 102, No. 477. (2007), 359–378
  • 4. [HB] A.D. Hendrickson and R.J. Buehler, Proper Scores for Probability Forecasters, The Annals of Mathematical Statistics, Vol. 42, No. 6 (1971), 1916–1921
  • 5. [MWG] A. Mas-Collel, M.D. Whinston, J.R. Green, Microeconomic Theory, Oxford University Press (1995)
  • 6. [McC] J.McCarthy, Measures of the value of information, Proceedings of the National Academy of Sciences, Vol. 42 (1956), 654–655
  • 7. [Sl] B. Salani´e, The Economics of Contracts, The MIT Press (2005)
  • 8. [Sv] L.J. Savage, Elicitation of personal probabilities and expectations, Journal of the American Statistical Association, Vol. 66, No. 336 (1971), 783–801
  • 9. [Sch] M.J. Schervish, A General Method for Comparing Probability Assessors, The Annals of Statistics, Vol. 17, No. 4 (1989), 1856–1879
  • 10. [SW] C.E. Shannon and W. Weaver, The Matematical Theory of Communications, Urbana, University of Illinois Press (1949)
Document Type
Publication order reference
Identifiers
YADDA identifier
bwmeta1.element.desklight-2a5848c5-17ea-4378-9ec9-eca6cfca0580
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