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

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  • Valsecchi, Irene

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.

Suggested Citation

  • Valsecchi, Irene, 2025. "Forecasts as repeated cheap talk from an expert of unknown statistical bias," Journal of Economic Behavior & Organization, Elsevier, vol. 233(C).
    • Handle: RePEc:eee:jeborg:v:233:y:2025:i:c:s0167268125000757
    DOI: 10.1016/j.jebo.2025.106955
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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