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Eliciting subjective probabilities with binary lotteries

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  • Harrison, Glenn W.
  • Martínez-Correa, Jimmy
  • Swarthout, J. Todd

Abstract

We evaluate a binary lottery procedure for inducing risk neutral behavior in a subjective belief elicitation task. Prior research has shown this procedure to robustly induce risk neutrality when subjects are given a single risk task defined over objective probabilities. Drawing a sample from the same subject population, we find evidence that the binary lottery procedure also induces linear utility in a subjective probability elicitation task using the Quadratic Scoring Rule. We also show that the binary lottery procedure can induce direct revelation of subjective probabilities in subjects with popular non-expected utility preference representations that satisfy weak conditions.

Suggested Citation

  • Harrison, Glenn W. & Martínez-Correa, Jimmy & Swarthout, J. Todd, 2014. "Eliciting subjective probabilities with binary lotteries," Journal of Economic Behavior & Organization, Elsevier, vol. 101(C), pages 128-140.
    • Handle: RePEc:eee:jeborg:v:101:y:2014:i:c:p:128-140
    DOI: 10.1016/j.jebo.2014.02.011
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    More about this item

    Keywords

    Subjective probability elicitation; Binary lottery procedure; Experimental economics; Risk neutrality;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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