Forecasts as repeated cheap talk from an expert of unknown statistical bias

Irene Valsecchi

Journal of Economic Behavior & Organization, 2025, vol. 233, issue C

Abstract: For two periods an expert E announces his forecast of the state to a decision-maker D. E and D disagree about the precision of the probability assessments that E makes. At the end of period 1 the state is observed, and D updates his opinion about E as a forecaster. In period 2 E tends to make announcements more extreme than his forecasts. Despite no upper bound to the cardinality of the final equilibrium partition, full revelation is never realized. In period 1 E takes into account that his report affects his reputation. This consideration can mitigate E’s incentive to exaggerate. However, full revelation is impossible and the equilibria are partitional.

Keywords: Cheap-talk; Expert; Statistical bias (search for similar items in EconPapers)
JEL-codes: D81 D84 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:233:y:2025:i:c:s0167268125000757

DOI: 10.1016/j.jebo.2025.106955

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