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The Complexity of Forecast Testing

Econometrica 2009 77(1), 93-105
Consider a weather forecaster predicting a probability of rain for the next day. We consider tests that, given a finite sequence of forecast predictions and outcomes, will either pass or fail the forecaster. Sandroni showed that any test which passes a forecaster who knows the distribution of nature can also be probabilistically passed by a forecaster with no knowledge of future events. We look at the computational complexity of such forecasters and exhibit a linear-time test and distribution of nature such that any forecaster without knowledge of the future who can fool the test must be able to solve computationally difficult problems. Thus, unlike Sandroni's work, a computationally efficient forecaster cannot always fool this test independently of nature.

Characterization of Revenue Equivalence

Econometrica 2009 77(1), 307-316 open access
The property of an allocation rule to be implementable in dominant strategies by a unique payment scheme is called revenue equivalence. We give a characterization of revenue equivalence based on a graph theoretic interpretation of the incentive compatibility constraints. The characterization holds for any (possibly infinite) outcome space and many of the known results are immediate consequences. Moreover, revenue equivalence can be identified in cases where existing theorems are silent.