Eliciting Subjective Probabilities with Binary Lotteries

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

Research output: Working paperResearch

Abstract

We evaluate the binary lottery procedure for inducing risk neutral behavior in a subjective belief elicitation task. Harrison, Martínez-Correa and Swarthout [2013] found that the binary lottery procedure works robustly to induce risk neutrality when subjects are given one risk task defined over objective probabilities. Drawing a sample from the same subject population, we find evidence that the binary lottery procedure 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 certain Non-Expected Utility preference representations that satisfy weak conditions that we identify.
We evaluate the binary lottery procedure for inducing risk neutral behavior in a subjective belief elicitation task. Harrison, Martínez-Correa and Swarthout [2013] found that the binary lottery procedure works robustly to induce risk neutrality when subjects are given one risk task defined over objective probabilities. Drawing a sample from the same subject population, we find evidence that the binary lottery procedure 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 certain Non-Expected Utility preference representations that satisfy weak conditions that we identify.
LanguageEnglish
Place of PublicationAtlanta, GA
PublisherCEAR, Georgia State University
Number of pages50
StatePublished - 2012
SeriesWorking paper / Center for Economic Analysis of Risk (CEAR)
Number2012-09

Keywords

  • Subjective Probability Elicitation
  • Binary Lottery Procedure
  • Experimental Economies
  • Risk Neutrality

Cite this

Harrison, G. W., Martínez-Correa, J., & Swarthout, J. T. (2012). Eliciting Subjective Probabilities with Binary Lotteries. Atlanta, GA: CEAR, Georgia State University. Working paper / Center for Economic Analysis of Risk (CEAR), No. 2012-09
Harrison, Glenn W. ; Martínez-Correa, Jimmy ; Swarthout, J. Todd. / Eliciting Subjective Probabilities with Binary Lotteries. Atlanta, GA : CEAR, Georgia State University, 2012. (Working paper / Center for Economic Analysis of Risk (CEAR); No. 2012-09).
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Harrison, GW, Martínez-Correa, J & Swarthout, JT 2012 'Eliciting Subjective Probabilities with Binary Lotteries' CEAR, Georgia State University, Atlanta, GA.

Eliciting Subjective Probabilities with Binary Lotteries. / Harrison, Glenn W.; Martínez-Correa, Jimmy; Swarthout, J. Todd.

Atlanta, GA : CEAR, Georgia State University, 2012.

Research output: Working paperResearch

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Harrison GW, Martínez-Correa J, Swarthout JT. Eliciting Subjective Probabilities with Binary Lotteries. Atlanta, GA: CEAR, Georgia State University. 2012.