Theoretical Economics 8 (2013), 263–280
Tai Wei Hu, Eran Shmaya
A decision maker needs predictions about the realization of a repeated experiment in each period. An expert provides a theory that, conditional on each finite history of outcomes, supplies a probabilistic prediction about the next outcome. However, there may be false experts without any knowledge of the data-generating process who deliver theories strategically. Hence, empirical tests for predictions are necessary. A test is manipulable if a false expert can pass the test with a high probability. For tests, as contracts, to be implementable, they have to be computable. Considering only computable tests, we show that there is a test that is not manipulable by any computable strategies and that accepts true experts with high probabilities. In particular, the constructed test is both future independent (Olszewski and Sandroni, 2008) and sequential (Shmaya, 2008). On the other hand, any computable test is manipulable by a strategy that is computable relative to the halting problem. Our conclusion overturns earlier results that future independent tests are manipulable, and shows that computability considerations have significant effects in these problems.
Keywords: Computability, expert testing, calibration tests, zero-sum games
JEL classification: D00
Full Text: PRINT VIEW