Future Parameter Prediction By Scoring Rules

Future Parameter Prediction By Scoring Rules

Saeed Hajizadeh, MohammadAmin Fazli, Jafar Habibi

Abstract

Scoring rules are common methods for incentivizing experts to present the opinions consistent with their beliefs. Information markets such as prediction markets and decision markets use scoring rules for eliciting the most accurate predictions experts can make. In these markets, experts are invited to buy and sell contracts, according to which they will be paid if their prediction about a future uncertain event is true. The final trading prices can be interpreted as an aggregation of their prediction for an uncertain future event. In this paper, we propose new mechanisms (prediction oriented and decision oriented) for predicting the value of uncertain continuous variables in the future. These mechanisms in their basic form, are scoring rules with a new paradigm. This paper also includes the results of performing a case study (a prediction oriented mechanism) for predicting the outcome of the 11th presidential election of Iran in 2013 to analyze the performance of our model. Besides the fact that the mechanism's average absolute error in predicting nominees' percentages was low, about 6.53%, it also predicted the final outcome order of all nominees correctly.

Keywords

Scoring Rule, Decision Scoring Rule, Variable Prediction, Election Prediction