Forecast Dispersion in Finite-Player Forecasting Games

23 Pages Posted: 15 Oct 2014 Last revised: 15 Feb 2017

Jin Yeub Kim

University of Nebraska at Lincoln - Department of Economics

Myungkyu Shim

Sogang University - Department of Economics

Date Written: February 14, 2017

Abstract

We study forecast dispersion in a finite-player forecasting game modeled as an aggregate game with payoff externality and dispersed information. In the game, each agent cares about being accurate as well as about the distance of his forecast from the average forecast; and with a finite number of agents, the agents can strategically control that average. We show that the finiteness of the number of agents weakens the strategic effect induced by the underlying preference. We find that when each agent prefers to be close to the average forecast, the presence of strategic manipulation of the average forecast contributes to a higher forecast dispersion; when instead each agent wants to be distinctive from the average, the opposite is true.

Keywords: forecast dispersion, finite-player, aggregate games, coordination, incomplete information

JEL Classification: C72, D82, D83, E37

Suggested Citation

Kim, Jin Yeub and Shim, Myungkyu, Forecast Dispersion in Finite-Player Forecasting Games (February 14, 2017). Available at SSRN: https://ssrn.com/abstract=2509502 or http://dx.doi.org/10.2139/ssrn.2509502

Jin Yeub Kim (Contact Author)

University of Nebraska at Lincoln - Department of Economics ( email )

Lincoln, NE 68588-0489
United States

HOME PAGE: http://sites.google.com/site/jinyeubkim

Myungkyu Shim

Sogang University - Department of Economics ( email )

35 Baekbeom-ro
Seoul, 121-742
Korea

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