Screening of Informed and Uninformed Experts

TL;DR

This paper proposes a contract-based method to distinguish informed experts from uninformed ones by leveraging their strategic interactions and uncertainty, effective even with minimal data.

Contribution

It introduces a novel contract design that incentivizes informed experts to accept and uninformed experts to reject, exploiting their strategic uncertainty.

Findings

Effective discrimination between informed and uninformed experts

Works with only a single data point

Applicable in settings with multiple experts

Abstract

Testing the validity of claims made by self-proclaimed experts can be impossible when testing them in isolation, even with infinite observations at the disposal of the tester. However, in a multiple expert setting it is possible to design a contract that only informed experts accept and uninformed experts reject. The tester can pit competing forecasts of future events against each other and take advantage of the uncertainty experts have about the other experts' knowledge. This contract will work even when there is only a single data point to evaluate.