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Belief Elicitation in Experiments: Is there a Hedging Problem? Author info | Abstract | Publisher info | Download info | Related research | Statistics Blanco, Mariana () (Royal Holloway, University of London)
Engelmann, Dirk () (Royal Holloway, University of London)
Koch, Alexander K. () (University of Aarhus)
Normann, Hans-Theo () (Royal Holloway, University of London)
Additional information is available for the following
registered author(s):
Belief elicitation in economics experiments usually relies on paying subjects according to the accuracy of stated beliefs in addition to payments for other decisions. Such incentives, however, allow risk-averse subjects to hedge with their stated beliefs against adverse outcomes of other decisions in the experiment. This raises two questions: (i) can we trust the existing belief elicitation results, (ii) can we avoid potential hedging confounds? Our results instill confidence regarding both issues. We propose an experimental design that eliminates hedging opportunities, and use this to test for the empirical relevance of hedging effects in the lab. We find no evidence for hedging, comparing the standard “hedging-prone” belief elicitation treatment to a “hedging-proof” design in a sequential prisoners’ dilemma game. Our findings are strengthened by the absence of hedging even in an additional non-belief elicitation treatment using a financial investment frame, where hedging arguably would be most natural.
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number
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Date of creation: May 2008Date of revision:
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Keywords: belief elicitation ; hedging ; methods ; experimental economics ; Other versions of this item:
Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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