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Eliciting Beliefs: Proper Scoring Rules, Incentives, Stakes and Hedging

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  • Armantier, Olivier
  • Treich, Nicolas

Abstract

Proper Scoring Rules (PSRs) are popular incentivized mechanisms to elicit an agent's beliefs. This paper combines theory and experiment to characterize how PSRs bias reported beliefs when (i) the PSR payments are increased, (ii) the agent has a financial stake in the event she is predicting, and (iii) the agent can hedge her prediction by taking an additional action. In contrast with previous literature, the PSR biases are characterized for all PSRs and all risk averse agents. Our results reveal complex distortions of reported beliefs, thereby raising concerns about the ability of PSRs to recover truthful beliefs in general decision-making environments.

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Bibliographic Info

Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 10-213.

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Date of creation: Dec 2010
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Publication status: Published in European Economic Review, vol.�62, Elsevier, 2013, p.�17-40.
Handle: RePEc:tse:wpaper:23866

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Citations

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Cited by:
  1. Manski, Charles F. & Neri, Claudia, 2013. "First- and second-order subjective expectations in strategic decision-making: Experimental evidence," Games and Economic Behavior, Elsevier, vol. 81(C), pages 232-254.
  2. Guy Mayraz, 2011. "Wishful Thinking," CEP Discussion Papers dp1092, Centre for Economic Performance, LSE.
  3. Matthew Wiswall & Basit Zafar, 2011. "Belief updating among college students: evidence from experimental variation in information," Staff Reports 516, Federal Reserve Bank of New York.
  4. Anna Dreber & Tore Ellingsen & Magnus Johannesson & David Rand, 2013. "Do people care about social context? Framing effects in dictator games," Experimental Economics, Springer, vol. 16(3), pages 349-371, September.
  5. Olivier Armantier & Scott Nelson & Giorgio Topa & Wilbert van der Klaauw & Basit Zafar, 2012. "The price is right: updating of inflation expectations in a randomized price information experiment," Staff Reports 543, Federal Reserve Bank of New York.
  6. Federica Alberti & Anna Conte & Kei Tsutsui, 2014. "Accuracy of proposers' beliefs in an allocation-type game," Jena Economic Research Papers 2014-002, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.

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