Only valuable experts can be valued

Suppose a principal Alice wishes to reduce her uncertainty regarding some future payoff. Consider a self-proclaimed expert Bob that may either be an informed expert knowing an exact (or approximate) distribution of a future random outcome that may affect Alice’s utility, or an uninformed expert who knows nothing more than Alice does. Alice would like to hire Bob and solicit his signal. Her goal is to incentivize an informed expert to accept the contract and reveal his knowledge while deterring an uninformed expert from accepting the contract altogether. The starting point of this work is a powerful negative result (Olszewski and Sandroni, 2007), which tells us that in the general case for any contract which guarantees an informed expert some positive payoff an uninformed expert (with no extra knowledge) has a strategy which guarantees him a positive payoff as well. At the face of this negative result, we reexamine the notion of an expert and conclude that knowing some hidden var...

• Type: Journal
• Year: 2011
• Where: SIGECOM
• Authors: Moshe Babaioff, Liad Blumrosen, Nicolas S. Lambert, Omer Reingold
• Keywords: Approximate Distribution, Arbitrary Distribution, ECommerce, Hidden Variable, SIGECOM 2011