Forecast Dispersion in Finite-Player Forecasting Games
The B.E. Journal of Theoretical Economics, Forthcoming
12 Pages Posted: 15 Oct 2014 Last revised: 29 Oct 2017
Date Written: October 25, 2017
We study forecast dispersion in a finite-player forecasting game modeled as an aggregate game with payoff externalities 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 in influence 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: Suggested Citation