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Small group forecasting using proportional-prize contests

Ronald Peeters (), Fan Rao () and Leonard Wolk ()
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Ronald Peeters: University of Otago
Fan Rao: Dongbei University of Finance and Economics
Leonard Wolk: Vrije Universiteit Amsterdam

Theory and Decision, 2022, vol. 92, issue 2, No 2, 293-317

Abstract: Abstract We consider a proportional-prize contest to forecast future events, and show that, in equilibrium, this mechanism possesses perfect forecasting ability for any group size when the contestants share common knowledge about the probabilities by which future events realize. Data gathered in a laboratory experiment confirm the performance invariance to group size. By contrast, when realization probabilities are not common knowledge, there are some differences across group sizes. The mechanism operates marginally better with three or four compared to two players. However, this effect is mainly driven by players’ behavior rather than by differences in the beliefs they form about the realization probabilities.

Keywords: Forecasting; Contests; Experiment; Behavioral mechanism design (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11238-021-09825-0

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