ProbabilitiesTo play matching pennies, players need to decide whether their opponent is more likely to play heads or tails next.What is ideally needed for forecasting applications is a probability density function over the possible outcomes. So, in this case, the probability of the next symbol being heads.
ForecastingIf you have a probability density function over the possible outcomes, that means that a forecast of the future possibilities can be made.That would look somethinng like the following diagram:
 Iterative predictions produce a forecast
The futureThere is a fairly simple way of motivating participants to provide probability density functions over the possible outcomes: have them set odds on those outcomes, and then force them to accept bets on them.If they give a high certainty - and are correct - then they get a greater reward. However, if they give a high certainty - and are wrong - then they get punished. However, this is considered to be too much of a complication for the early versions of the matching pennies tournament.
|
