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Scoring rules for subjective probability distributions

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

Abstract

Subjective beliefs are elicited routinely in economics experiments. However, such elicitation often suffers from two possible disadvantages. First, beliefs are recovered in the form of a summary statistic, usually the mean, of the underlying latent distribution. Second, recovered beliefs are biased significantly due to risk aversion. We characterize an approach for eliciting the entire subjective belief distribution that is minimally biased due to risk aversion. We offer simulated examples to demonstrate the intuition of our approach. We also provide theory to formally characterize our framework. And we provide experimental evidence which corroborates our theoretical results. We conclude that for empirically plausible levels of risk aversion, one can reliably elicit most important features of the latent subjective belief distribution without undertaking calibration for risk attitudes providing one is willing to assume Subjective Expected Utility.

Suggested Citation

  • Harrison, Glenn W. & Martínez-Correa, Jimmy & Swarthout, J. Todd & Ulm, Eric R., 2017. "Scoring rules for subjective probability distributions," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 430-448.
  • Handle: RePEc:eee:jeborg:v:134:y:2017:i:c:p:430-448
    DOI: 10.1016/j.jebo.2016.12.001
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    References listed on IDEAS

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    2. Steffen Andersen & John Fountain & Glenn Harrison & E. Rutström, 2014. "Estimating subjective probabilities," Journal of Risk and Uncertainty, Springer, vol. 48(3), pages 207-229, June.
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    Citations

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    Cited by:

    1. Di Girolamo, Amalia & Harrison, Glenn W. & Lau, Morten I. & Swarthout, J. Todd, 2015. "Subjective belief distributions and the characterization of economic literacy," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 59(C), pages 1-12.
    2. Amalia Di Girolamo & Glenn W. Harrison & Morten I. Lau & J. Todd Swarthout, 2013. "Characterizing Financial and Statistical Literacy," Experimental Economics Center Working Paper Series 2013-04, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
    3. Jaspersen, Johannes G., 2013. "An incentive compatible scoring rule for ordinal judgments of expected utility maximizers," Economics Letters, Elsevier, vol. 120(2), pages 245-248.
    4. Harrison, Glenn W. & Martínez-Correa, Jimmy & Swarthout, J. Todd & Ulm, Eric R., 2015. "Eliciting subjective probability distributions with binary lotteries," Economics Letters, Elsevier, vol. 127(C), pages 68-71.
    5. Karl Schlag & James Tremewan & Joël Weele, 2015. "A penny for your thoughts: a survey of methods for eliciting beliefs," Experimental Economics, Springer;Economic Science Association, vol. 18(3), pages 457-490, September.
    6. Steffen Andersen & John Fountain & Glenn Harrison & E. Rutström, 2014. "Estimating subjective probabilities," Journal of Risk and Uncertainty, Springer, vol. 48(3), pages 207-229, June.
    7. Vickie Bajtelsmit & Jennifer Coats & Paul Thistle, 2015. "The effect of ambiguity on risk management choices: An experimental study," Journal of Risk and Uncertainty, Springer, vol. 50(3), pages 249-280, June.
    8. Schüssler, Katharina, 2018. "The Influence of Overconfidence and Competition Neglect On Entry Into Competition," Rationality and Competition Discussion Paper Series 87, CRC TRR 190 Rationality and Competition.
    9. Karl H. Schlag & Joël J. van der Weele, 2015. "A method to elicit beliefs as most likely intervals," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 10(5), pages 456-468, September.
    10. Adrian Hillenbrand & André Schmelzer, 2015. "Beyond Information: Disclosure, Distracted Attention, and Investor Behavior," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2015_20, Max Planck Institute for Research on Collective Goods.

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