DESIGN OF MANIPULATION PREVENTING MECHANISM OF DEMAND FORECAST

Recently, it is severely criticized that the demand forecast of public investment has been manipulated by Japanese administration to justify the implementation of their projects. The aim of this paper is to design the mechanism which prevents the manipulation of demand forecast. Based on the contract theory, we formulate the principal-agent relationship in demand forecast. By solving this, we derive two optimal contracts. One is VOI reward scheme and the other is logarithmic scoring reward scheme. By examining this result, we derive some implications for the mechanism design of demand forecast.