IDEAS home Printed from https://ideas.repec.org/a/the/publsh/3991.html
   My bibliography  Save this article

Costly miscalibration

Author

Listed:
  • Guo, Yingni

    (Department of Economics, Northwestern University)

  • Shmaya, Eran

    (Department of Economics, Stony Brook University)

Abstract

We consider a platform which provides probabilistic forecasts to a customer using some algorithm. We introduce a concept of miscalibration, which measures the discrepancy between the forecast and the truth. We characterize the platform's optimal equilibrium when it incurs some cost for miscalibration, and show how this equilibrium depends on the miscalibration cost: when the miscalibration cost is low, the platform uses more distant forecasts and the customer is less responsive to the platform's forecast; when the miscalibration cost is high, the platform can achieve its commitment payoff in an equilibrium, and the only extensive-form rationalizable strategy of the platform is its strategy in the commitment solution. Our results show that miscalibration cost is a proxy for the degree of the platform's commitment power, and thus provide a microfoundation for the commitment solution.

Suggested Citation

  • Guo, Yingni & Shmaya, Eran, 2021. "Costly miscalibration," Theoretical Economics, Econometric Society, vol. 16(2), May.
    • Handle: RePEc:the:publsh:3991
    as

    Download full text from publisher

    File URL: http://econtheory.org/ojs/index.php/te/article/viewFile/20210477/30635/872
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Johannes Abeler & Daniele Nosenzo & Collin Raymond, 2019. "Preferences for Truth‐Telling," Econometrica, Econometric Society, vol. 87(4), pages 1115-1153, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Eilat, Ran & Neeman, Zvika, 2023. "Communication with endogenous deception costs," Journal of Economic Theory, Elsevier, vol. 207(C).
    2. Alonso, Ricardo & Câmara, Odilon, 2021. "Organizing Data Analytics," CEPR Discussion Papers 16768, C.E.P.R. Discussion Papers.
    3. Alexander V. Kolesnikov & Fedor Sandomirskiy & Aleh Tsyvinski & Alexander P. Zimin, 2022. "Beckmann's approach to multi-item multi-bidder auctions," Papers 2203.06837, arXiv.org, revised Sep 2022.
    4. Andriy Zapechelnyuk, 2023. "On the equivalence of information design by uninformed and informed principals," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 76(4), pages 1051-1067, November.
    5. Tsakas, Elias & Tsakas, Nikolas, 2021. "Noisy persuasion," Games and Economic Behavior, Elsevier, vol. 130(C), pages 44-61.
    6. Daehong Min, 2021. "Bayesian persuasion under partial commitment," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(3), pages 743-764, October.
    7. Pei, Harry, 2023. "Repeated communication with private lying costs," Journal of Economic Theory, Elsevier, vol. 210(C).
    8. Emir Kamenica & Kyungmin Kim & Andriy Zapechelnyuk, 2021. "Bayesian persuasion and information design: perspectives and open issues," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(3), pages 701-704, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Johannes Abeler & Armin Falk & Fabian Kosse, 2021. "Malleability of Preferences for Honesty," CESifo Working Paper Series 9033, CESifo.
    2. Jacquemet, N. & Luchini, S. & Malézieux, A. & Shogren, J.F., 2020. "Who’ll stop lying under oath? Empirical evidence from tax evasion games," European Economic Review, Elsevier, vol. 124(C).
    3. De Geest, Lawrence R. & Kingsley, David C., 2021. "Norm enforcement with incomplete information," Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 403-430.
    4. Alain Cohn & Tobias Gesche & Michel André Maréchal, 2022. "Honesty in the Digital Age," Management Science, INFORMS, vol. 68(2), pages 827-845, February.
    5. Dufwenberg, Martin & Feldman, Paul & Servátka, Maroš & Tarrasó, Jorge & Vadovič, Radovan, 2023. "Honesty in the city," Games and Economic Behavior, Elsevier, vol. 139(C), pages 15-25.
      • Dufwenberg, Martin & Servátka, Maroš & Tarrasó, Jorge & Vadovič, Radovan, 2021. "Honesty in the City," MPRA Paper 106256, University Library of Munich, Germany.
      • Martin Dufwenberg & Paul Feldman & Maros Servatka & Jorge Tarraso & Radovan Vadovic, 2022. "Honesty in the City," Working Papers 2022-03, University of Alaska Anchorage, Department of Economics.
      • Dufwenberg, Martin & Feldman, Paul & Servátka, Maroš & Tarrasó, Jorge & Vadovič, Radovan, 2022. "Honesty in the city," MPRA Paper 115044, University Library of Munich, Germany.
    6. Lohse, Johannes & McDonald, Rebecca, 2021. "Absolute groupishness and the demand for information," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242454, Verein für Socialpolitik / German Economic Association.
    7. Cao, Qian & Li, Jianbiao & Niu, Xiaofei, 2022. "White lies in tournaments," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    8. Ivan Soraperra & Anton Suvorov & Jeroen Van de Ven & Marie Claire Villeval, 2019. "Doing Bad to Look Good: Negative Consequences of Image Concerns on Prosocial Behavior," Revue économique, Presses de Sciences-Po, vol. 70(6), pages 945-966.
    9. repec:cup:judgdm:v:14:y:2019:i:4:p:423-439 is not listed on IDEAS
    10. Steinel, Wolfgang & Valtcheva, Kalina & Gross, Jörg & Celse, Jérémy & Max, Sylvain & Shalvi, Shaul, 2022. "(Dis)honesty in the face of uncertain gains or losses," Journal of Economic Psychology, Elsevier, vol. 90(C).
    11. SeEun Jung & Sang-Hyun Kim, 2020. "Managing the Public Health Risks in the Time of COVID-19," Working papers 2020rwp-181, Yonsei University, Yonsei Economics Research Institute.
    12. Jesper Akesson & Sam Ashworth-Hayes & Robert Hahn & Robert Metcalfe & Itzhak Rasooly, 2022. "Fatalism, beliefs, and behaviors during the COVID-19 pandemic," Journal of Risk and Uncertainty, Springer, vol. 64(2), pages 147-190, April.
    13. Kim L. Böhm & Sebastian J. Goerg & Lilia Wasserka-Zhurakhovska, 2023. "How Does Unethical Behavior Spread? Gender Matters!," CESifo Working Paper Series 10314, CESifo.
    14. Ezquerra, Lara & Kolev, Gueorgui I. & Rodriguez-Lara, Ismael, 2018. "Gender differences in cheating: Loss vs. gain framing," Economics Letters, Elsevier, vol. 163(C), pages 46-49.
    15. Avner Seror, 2021. "Social Roles," AMSE Working Papers 2134, Aix-Marseille School of Economics, France.
    16. Feess, Eberhard & Schilling, Thomas & Timofeyev, Yuriy, 2023. "Misreporting in teams with individual decision making: The impact of information and communication," Journal of Economic Behavior & Organization, Elsevier, vol. 209(C), pages 509-532.
    17. Radu, Vranceanu & Delphine, Dubart, 2019. "Experimental evidence on deceitful communication: does everyone have a price ?," ESSEC Working Papers WP1806, ESSEC Research Center, ESSEC Business School.
    18. Cappelen, Alexander W. & Fjeldstad, Odd-Helge & Mmari, Donald & Sjursen, Ingrid Hoem & Tungodden, Bertil, 2021. "Understanding the resource curse: A large-scale experiment on corruption in Tanzania," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 129-157.
    19. Khalmetski, Kiryl, 2019. "Evasion of guilt in expert advice," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 296-310.
    20. James Alm & Antoine Malézieux, 2021. "40 years of tax evasion games: a meta-analysis," Experimental Economics, Springer;Economic Science Association, vol. 24(3), pages 699-750, September.
    21. Buckle, Georgia E. & Füllbrunn, Sascha & Luhan, Wolfgang J., 2021. "Lying for others: The impact of agency on misreporting," Economics Letters, Elsevier, vol. 198(C).

    More about this item

    Keywords

    Calibration; miscalibration; cheap talk; commitment; Bayesian persuasion; e-commerce platform;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:the:publsh:3991. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Martin J. Osborne (email available below). General contact details of provider: http://econtheory.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.