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Small group forecasting using proportional-prize contests

Author

Listed:
  • Ronald Peeters

    (University of Otago)

  • Fan Rao

    (Dongbei University of Finance and Economics)

  • Leonard Wolk

    (Vrije Universiteit Amsterdam)

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.

Suggested Citation

  • Ronald Peeters & Fan Rao & Leonard Wolk, 2022. "Small group forecasting using proportional-prize contests," Theory and Decision, Springer, vol. 92(2), pages 293-317, March.
    • Handle: RePEc:kap:theord:v:92:y:2022:i:2:d:10.1007_s11238-021-09825-0
    DOI: 10.1007/s11238-021-09825-0
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    References listed on IDEAS

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    Cited by:

    1. Cem Peker, 2023. "Extracting the collective wisdom in probabilistic judgments," Theory and Decision, Springer, vol. 94(3), pages 467-501, April.

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