The Principal-Agent Approach to Testing Experts
Recent literature on testing experts shows that it is often impossible to determine whether an expert knows the stochastic process that generates data. Despite this negative result, we show that there often exist contracts that allow a decision maker to attain the first-best payoff without learning the expert's type. This kind of full-surplus extraction is always possible in infinite-horizon models in which future payoffs are not discounted. If future payoffs are discounted (but the discount factor tends to 1), the possibility of full-surplus extraction depends on a constraint involving the forecasting technology. (JEL D82)
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Volume (Year): 3 (2011)
Issue (Month): 2 (May)
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- Eddie Dekel & Yossi Feinberg, 2006.
"Non-Bayesian Testing of a Stochastic Prediction,"
1418, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Drew Fudenberg & David K. Levine, 1996.
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- Vladimir Vovk & Glenn Shafer, 2005. "Good randomized sequential probability forecasting is always possible," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 67(5), pages 747-763.
- Alvaro Sandroni, 2003. "The reproducible properties of correct forecasts," International Journal of Game Theory, Springer;Game Theory Society, vol. 32(1), pages 151-159, December.
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