Post financial forecasting game theory and decision making

This paper examines the post-forecasting issue where predictions influence behavior and render original forecasts obsolete. Using game-theory models, we analyze two player types: econometricians with predictions and normal individuals. Our study suggests that late-moving individuals should not participate, while early-mover probabilities in Bayesian games are beneficial. Improved prediction accuracy benefits econometricians but has little impact on normal individuals. Obtaining prediction information incurs a positive cost, overlooked with high accuracy. These findings, supported by preference, uncertainty, information price, and market efficiency analyses, have important implications for investors using forecasting information in financial markets.