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Nonmanipulable Bayesian Testing

  • Colin Stewart

This paper considers the problem of testing an expert who makes probabilistic forecasts about the outcomes of a stochastic process. I show that, under general conditions on the tester's prior, a likelihood test can distinguish informed from uninformed experts with high prior probability. The test rejects informed experts on data-generating processes where the tester quickly learns the true probabilities by updating her prior. However, the set of processes on which informed experts are rejected is topologically small. These results contrast sharply with many negative results in the literature.

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File URL: http://www.economics.utoronto.ca/public/workingPapers/tecipa-360.pdf
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Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-360.

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Length: 23 pages
Date of creation: 24 Jun 2009
Date of revision:
Handle: RePEc:tor:tecipa:tecipa-360
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  1. D. Foster & R. Vohra, 2010. "Asymptotic Calibration," Levine's Working Paper Archive 468, David K. Levine.
  2. 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.
  3. Ehud Kalai & Ehud Lehrer, 1992. "Weak and Strong Merging of Opinions," Discussion Papers 983, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Wojciech Olszewski & Marcin Pęski, 2011. "The Principal-Agent Approach to Testing Experts," American Economic Journal: Microeconomics, American Economic Association, vol. 3(2), pages 89-113, May.
  5. Nabil I. Al-Najjar & Jonathan Weinstein, 2008. "Comparative Testing of Experts," Econometrica, Econometric Society, vol. 76(3), pages 541-559, 05.
  6. Ehud Kalai & Ehud Lehrer, 1990. "Rational Learning Leads to Nash Equilibrium," Discussion Papers 925, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Eddie Dekel & Yossi Feinberg, 2006. "Non-Bayesian Testing of a Stochastic Prediction," Discussion Papers 1418, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Al-Najjar, Nabil I. & Sandroni, Alvaro & Smorodinsky, Rann & Weinstein, Jonathan, 2010. "Testing theories with learnable and predictive representations," Journal of Economic Theory, Elsevier, vol. 145(6), pages 2203-2217, November.
  9. Alvaro Sandroni & Rann Smorodinsky, 1999. "The speed of rational learning," International Journal of Game Theory, Springer, vol. 28(2), pages 199-210.
  10. Sorin, Sylvain, 1999. "Merging, Reputation, and Repeated Games with Incomplete Information," Games and Economic Behavior, Elsevier, vol. 29(1-2), pages 274-308, October.
  11. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April.
  12. Wojciech Olszewski & Alvaro Sandroni, 2008. "Manipulability of Future-Independent Tests," Econometrica, Econometric Society, vol. 76(6), pages 1437-1466, November.
  13. Wojciech Olszewski & Alvaro Sandroni, 2006. "Strategic Manipulation of Empirical Tests," Discussion Papers 1425, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  14. Feinberg, Yossi & Stewart, Colin, 2007. "Testing Multiple Forecasters," Research Papers 1957, Stanford University, Graduate School of Business.
  15. Shmaya, Eran, 2008. "Many inspections are manipulable," Theoretical Economics, Econometric Society, vol. 3(3), September.
  16. Lehrer, Ehud, 2001. "Any Inspection Is Manipulable," Econometrica, Econometric Society, vol. 69(5), pages 1333-47, September.
  17. Echenique, Federico & Shmaya, Eran, 2007. "You won’t harm me if you fool me," Working Papers 1281, California Institute of Technology, Division of the Humanities and Social Sciences.
  18. Lehrer, Ehud & Smorodinsky, Rann, 2000. "Relative entropy in sequential decision problems1," Journal of Mathematical Economics, Elsevier, vol. 33(4), pages 425-439, May.
  19. Alvaro Sandroni, 2003. "The reproducible properties of correct forecasts," International Journal of Game Theory, Springer, vol. 32(1), pages 151-159, December.
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