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Estimating subjective probabilities
Department of Economics, Copenhagen Business School, Copenhagen, Denmark.
CEAR, Robinson College of Business, Georgia State University, Atlanta GA, United States.
Department of Risk Management and Insurance and CEAR, Robinson College of Business, Georgia State University, Atlanta GA, United States; Center for the Economic Analysis of Risk, J. Mack Robinson College of Business, Georgia State University, Atlanta GA, United States.
Department of Economics, Andrew Young School of Policy Studies, Dean's Behavioral Economics Laboratory, Robinson College of Business, Georgia State University, Atlanta GA, United States.ORCID iD: 0000-0001-8616-3318
2014 (English)In: Journal of Risk and Uncertainty, ISSN 0895-5646, E-ISSN 1573-0476, Vol. 48, no 3, p. 207-229Article in journal (Refereed) Published
Abstract [en]

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.

Place, publisher, year, edition, pages
Springer, 2014. Vol. 48, no 3, p. 207-229
Keywords [en]
Risk attitudes, Scoring rules, Subjective probabilities
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:oru:diva-68847DOI: 10.1007/s11166-014-9194-zISI: 000339881800002Scopus ID: 2-s2.0-84905173804OAI: oai:DiVA.org:oru-68847DiVA, id: diva2:1247328
Available from: 2018-09-11 Created: 2018-09-11 Last updated: 2018-09-13Bibliographically approved

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Rutström, Elisabet

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CiteExportLink to record
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Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf