TY - JOUR
T1 - Estimating Subjective Probabilities
AU - Andersen, Steffen
AU - Fountain, John
AU - Harrison, Glenn W.
AU - Rutström, E. Elisabeth
PY - 2014
Y1 - 2014
N2 - Subjective probabilities play a central role in many economic decisions and act as an immediate confound of inferences about behavior, unless controlled for. Several procedures to recover subjective probabilities have been proposed, but in order to recover the correct latent probability one must either construct elicitation mechanisms that control for risk aversion, or construct elicitation mechanisms which undertake 'calibrating adjustments' to elicited reports. We illustrate how the joint estimation of risk attitudes and subjective probabilities can provide the calibration adjustments that theory calls for. We illustrate this approach using data from a controlled experiment with real monetary consequences to the subjects. This allows the observer to make inferences about the latent subjective probability, under virtually any well-specified model of choice under subjective risk, while still employing relatively simple elicitation mechanisms.
AB - Subjective probabilities play a central role in many economic decisions and act as an immediate confound of inferences about behavior, unless controlled for. Several procedures to recover subjective probabilities have been proposed, but in order to recover the correct latent probability one must either construct elicitation mechanisms that control for risk aversion, or construct elicitation mechanisms which undertake 'calibrating adjustments' to elicited reports. We illustrate how the joint estimation of risk attitudes and subjective probabilities can provide the calibration adjustments that theory calls for. We illustrate this approach using data from a controlled experiment with real monetary consequences to the subjects. This allows the observer to make inferences about the latent subjective probability, under virtually any well-specified model of choice under subjective risk, while still employing relatively simple elicitation mechanisms.
KW - Subjective probabilities
KW - Scoring rules
KW - Risk attitudes
U2 - 10.1007/s11166-014-9194-z
DO - 10.1007/s11166-014-9194-z
M3 - Journal article
SN - 0895-5646
VL - 48
SP - 207
EP - 229
JO - Journal of Risk and Uncertainty
JF - Journal of Risk and Uncertainty
IS - 3
ER -