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Inferring beliefs as subjectively imprecise probabilities
Department of Economics, Copenhagen Business School, Copenhagen, Denmark.
Department of Economics, University of Canterbury, Christchurch, New Zealand.
Department of Risk Management and Insurance, Center for the Economic Analysis of Risk, Georgia State University, Atlanta GA, United States.
Department of Economics, University of Sheffield, Sheffield, United Kingdom.
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2012 (English)In: Theory and Decision, ISSN 0040-5833, E-ISSN 1573-7187, Vol. 73, no 1, p. 161-184Article in journal (Refereed) Published
Abstract [en]

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.

Place, publisher, year, edition, pages
Springer Nature , 2012. Vol. 73, no 1, p. 161-184
Keywords [en]
Experiments, Non-linear mixed logit, Random coefficients, Subjective beliefs, Subjective risk, Imprecise probabilities, Mixed logit, Risk attitude, Simulated likelihood, Structural models, Subjective probability, Estimation, Maximum likelihood, Model structures, Risk perception
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:oru:diva-68854DOI: 10.1007/s11238-011-9276-1ISI: 000305225000008Scopus ID: 2-s2.0-84861985902OAI: oai:DiVA.org:oru-68854DiVA, id: diva2:1247340
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