Resource title

Eliciting Beliefs - Theory and Experiments

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Resource description

Subjective beliefs play a role in many economic decisions. There is a large theoreticalliterature on the elicitation of beliefs, and an equally large empirical literature. However, there is agulf between the two. The theoretical literature proposes a range of procedures that can be used torecover beliefs, but stresses the need to make strong auxiliary assumptions or “calibratingadjustments” to elicited reports in order to recover the latent belief. With some notable exceptions,the empirical literature seems intent on either making those strong assumptions or ignoring the needfor calibration. We make three contributions to bridge this gulf. First, we offer a general theoreticalframework in which the belief elicitation task can be viewed as an exchange of state-dependentcommodities between two traders. Second, we provide a specific elicitation procedure which has clearcounterparts in field betting environments, and that is directly motivated by our theoreticalframework. Finally, we illustrate how one can jointly estimate risk attitudes and subjective beliefs usingstructural maximum likelihood methods. This allows the observer to make inferences about thelatent subjective belief, calibrating for virtually any well-specified model of choice under uncertainty.We demonstrate our procedures with an experiment in which we elicit subjective probabilities overthree future events and one fact.

Resource author

Steffen Andersen, John Fountain, Glenn W. Harrison, E. Elisabet Rutström

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Resource language

eng

Resource content type

application/pdf

Resource resource URL

http://hdl.handle.net/10398/7799

Resource license

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