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Simple belief elicitation: An experimental evaluation

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  • Karl Schlag

    (University of Vienna)

  • James Tremewan

    (University of Auckland)

Abstract

We present a method for eliciting beliefs about probabilities when multiple realisations of an outcome are available, the “frequency” method. The method is applicable for any reasonable utility function. Unlike existing techniques that account for deviations from risk-neutrality, this method is highly transparent to subjects and easy to implement. Rather than identifying point beliefs these methods identify bounds on beliefs, thus trading off precision for generality and simplicity. An experimental comparison of this method and a popular alternative, the Karni method, shows that subjects indeed find the frequency method easier to understand. Significantly, we show that confusion due to the complexity of the Karni method leads to less cognitively able subjects erroneously stating a belief of 50%, a bias not present in the frequency method.

Suggested Citation

  • Karl Schlag & James Tremewan, 2021. "Simple belief elicitation: An experimental evaluation," Journal of Risk and Uncertainty, Springer, vol. 62(2), pages 137-155, April.
    • Handle: RePEc:kap:jrisku:v:62:y:2021:i:2:d:10.1007_s11166-021-09349-6
    DOI: 10.1007/s11166-021-09349-6
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    3. Lata Gangadharan & Philip J. Grossman & Nina Xue, 2022. "Stepping Stone: Identifying self-image concerns from motivated beliefs: Does it matter how and whom you ask?," Monash Economics Working Papers 2022-05, Monash University, Department of Economics.
    4. Lata Gangadharan & Philip J. Grossman & Nina Xue, 2021. "Identifying self-image concerns from motivated beliefs: Does it matter how and whom you ask?," Monash Economics Working Papers 2021-17, Monash University, Department of Economics.
    5. Elias Bouacida & Renaud Foucart, 2020. "The acceptability of lotteries in allocation problems," Working Papers 301646245, Lancaster University Management School, Economics Department.
    6. Ďuriník, Michal & Morita, Hodaka & Servátka, Maroš & Zhang, Le, 2023. "Promotions and Group Identity," MPRA Paper 119389, University Library of Munich, Germany.
    7. Kim, Duk Gyoo & Kim, Hee Chun, 2022. "Probability matching and strategic decision making," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 98(C).
    8. Elias Bouacida & Renaud Foucart, 2022. "Rituals of Reason," Working Papers 344119591, Lancaster University Management School, Economics Department.
    9. Charness, Gary & Gneezy, Uri & Rasocha, Vlastimil, 2021. "Experimental methods: Eliciting beliefs," Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 234-256.

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    More about this item

    Keywords

    Belief elicitation; Experiment; Frequency format; Cognitive ability;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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