Inferring Beliefs as Subjectively Imprecise Probabilities

Steffen Andersen, John Fountain, Glenn W. Harrison, Arna Risa Hole, E. Elisabeth Rutström

Research output: Contribution to journalJournal articleResearchpeer-review


We propose a method for estimating subjective beliefs, viewed as a subjective probability distribution. The key insight is to characterize beliefs as a parameter to be estimated from observed choices in a well-defined experimental task and to estimate that parameter as a random coefficient. The experimental task consists of a series of standard lottery choices in which the subject is assumed to use conventional risk attitudes to select one lottery or the other and then a series of betting choices in which the subject is presented with a range of bookies offering odds on the outcome of some event that the subject has a belief over. Knowledge of the risk attitudes of subjects conditions the inferences about subjective beliefs. Maximum simulated likelihood methods are used to estimate a structural model in which subjects employ subjective beliefs to make bets. We present evidence that some subjective probabilities are indeed best characterized as probability distributions with non-zero variance.
Original languageEnglish
JournalTheory and Decision
Issue number1
Pages (from-to)161-184
Number of pages24
Publication statusPublished - 2012


  • Subjective Risk
  • Subjective Beliefs
  • Random Coefficients
  • Non-Linear Mixed Logit
  • Experiments

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