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arXiv · 2303.10857

Proxy Forecasting to Avoid Stochastic Decision Rules in Decision Markets

Wenlong Wang·Thomas Pfeiffer
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Abstract

Information that is of relevance for decision-making is often distributed, and held by self-interested agents. Decision markets are well-suited mechanisms to elicit such information and aggregate it into conditional forecasts that can be used for decision-making. However, for incentive-compatible elicitation, decision markets rely on stochastic decision rules which entails that sometimes actions have to be taken that have been predicted to be sub-optimal. In this work, we propose three closely related mechanisms that elicit and aggregate information similar to a decision market, but are incentive compatible despite using a deterministic decision rule. Following ideas from peer prediction mechanisms, proxies rather than observed future outcomes are used to score predictions. The first mechanism requires the principal to have her own signal, which is then used as a proxy to elicit information from a group of self-interested agents. The principal then deterministically maps the aggregated forecasts and the proxy to the best possible decision. The second and third mechanisms expand the first to cover a scenario where the principal does not have access to her own signal. The principal offers a partial profit to align the interest of one agent and retrieve its signal as a proxy; or alternatively uses a proper peer prediction mechanism to elicit signals from two agents. Aggregation and decision-making then follow the first mechanism. We evaluate our first mechanism using a multi-agent bandit learning system. The result suggests that the mechanism can train agents to achieve a performance similar to a Bayesian inference model with access to all information held by the agents.

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Wenlong Wang, Thomas Pfeiffer. 2023-03-20. Proxy Forecasting to Avoid Stochastic Decision Rules in Decision Markets. https://arxiv.org/abs/2303.10857

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