Strategic coordination in forecasting: An experimental study

Arbeitspapier

Reputational herding has been considered as a driving force behind economic and financial forecasts clustered around consensus values. Strategic coordination can consequently explain poor performances of prediction markets as resulting from the distinct incentives that forecasters face. While this notion has been considered theoretically and empirically, the underlying behavioral working mechanisms have not yet been described. We thus put forth an exploratory experiment on the emergence and robustness of coordination in a forecasting setting implementing contradictory incentives for accurate forecasts and coordination. Forecasts are shown to be inaccurate and biased toward current values. This in turn has subjects aiming at coordination benefits. Predominantly, coordination is achieved through the risk-dominant equilibrium as the game proceeds. Once established, coordination is fairly stable and adds to overall welfare. Our results support the assumption of rational herding as a driving force for predictions of poor accuracy that are systematically biased towards focal points.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: cege Discussion Papers ; No. 195

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: General ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Financial Forecasting and Simulation
• Subject: coordination ; incentives ; laboratory experiment ; reputational herding ; sunspot equilibrium

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bizer, Kilian ; Meub, Lukas ; Proeger, Till ; Spiwoks, Markus
• Event: Veröffentlichung
• (who): University of Göttingen, Center for European, Governance and Economic Development Research (cege)
• (where): Göttingen
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/93245
• Last update: 10.03.2025, 11:44 AM CET