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Using experimental economics to evaluate alternative subjective elicitation procedures

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  • Keith Coble
  • Zhijun Yang
  • M. Darren Hudson

Abstract

Managing uncertainty is an unavoidable challenge in a variety of decision contexts. If empirical data are available, statistics can be used to assist decision-making. If objective data are absent, experts are commonly used as a source of subjective probability estimates about the variable of interest. In our controlled economic experiment, a web-based software was developed and incentive-compatible rewards were applied to participants in order to induce rational decision-making. Participants assessed data drawn from known distributions and then responded to a subjective probability elicitation. The empirical results provide experimentally based guidance on elicitation and aggregation techniques that yield the most accurate subjective estimates of unknown probabilities. The results can be applied to a wide array of decision-making processes involving subjective probability analysis.

Suggested Citation

  • Keith Coble & Zhijun Yang & M. Darren Hudson, 2011. "Using experimental economics to evaluate alternative subjective elicitation procedures," Applied Economics, Taylor & Francis Journals, vol. 43(14), pages 1729-1736.
    • Handle: RePEc:taf:applec:v:43:y:2011:i:14:p:1729-1736
    DOI: 10.1080/00036840802600632
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    References listed on IDEAS

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    1. Ouchi, Fumika, 2004. "A literature review on the use of expert opinion in probabilistic risk analysis," Policy Research Working Paper Series 3201, The World Bank.
    2. Zhijun Yang & K. H. Coble & M. Darren Hudson, 2009. "The role of individual personality type in subjective risk elicitation outcomes," Journal of Risk Research, Taylor & Francis Journals, vol. 12(2), pages 209-222, March.
    3. Robert G. Nelson & David A. Bessler, 1989. "Subjective Probabilities and Scoring Rules: Experimental Evidence," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(2), pages 363-369.
    4. Bruno Chauvin & Danièle Hermand & Etienne Mullet, 2007. "Risk Perception and Personality Facets," Risk Analysis, John Wiley & Sons, vol. 27(1), pages 171-185, February.
    5. Tom Knight & S. R. Johnson & Robert M. Finley, 1985. "Farmers' Subjective Probabilities in Northern Thailand: Comment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(1), pages 147-148.
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    1. Patrick Bell & Rozlyn Engel & Darren Hudson & Julian Jamison & William Skimmyhorn, 2018. "Risk preferences in future military leaders," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 2(2), pages 11-24, September.

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