Forecast Dispersion in Finite-Player Forecasting Games

In: The B.E. journal of theoretical economics, Band 19, Heft 1

Abstract

AbstractWe 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 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.