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Eliciting belief distributions using a random two-level partitioning of the state space

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Abstract

I introduce a new method to incentivise the elicitation of belief distributions, the Random Partitions method. With this method, an agent’s payoff not only depends on the realised state and the elicited distribution, but also on a randomised two-level partitioning of the state-space. The method creates a binary lottery payoff structure where reports closer to an agent’s true belief distribution generate a higher probability to earn a high payout. The randomisation of the state-space partitioning ensures that the agent is incentivised to report correctly across the entire belief distribution. I compare the introduced Random Partitions method with both the well known Quadratic Scoring Rule, and a method based on the Becker-DeGroot-Marschak procedure and argue that the Random Partitions method gives substantially stronger truth-telling incentives to agents in situations where there are many states/bins.

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  • de Haan, Thomas, 2020. "Eliciting belief distributions using a random two-level partitioning of the state space," Working Papers in Economics 1/20, University of Bergen, Department of Economics.
    • Handle: RePEc:hhs:bergec:2020_001
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    1. Armantier, Olivier & Treich, Nicolas, 2013. "Eliciting beliefs: Proper scoring rules, incentives, stakes and hedging," European Economic Review, Elsevier, vol. 62(C), pages 17-40.
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    More about this item

    Keywords

    Belief elicitation; randomized state/event Space; partitioning; proper scoring rules.;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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