Simple belief elicitation: An experimental evaluation

Karl Schlag, James Tremewan

Publications: Contribution to journalArticlePeer Reviewed

Abstract

We present a method for eliciting beliefs about probabilities when multiple realisations of an outcome are available, the "frequency" method. The method is applicable for any reasonable utility function. Unlike existing techniques that account for deviations from risk-neutrality, this method is highly transparent to subjects and easy to implement. Rather than identifying point beliefs these methods identify bounds on beliefs, thus trading off precision for generality and simplicity. An experimental comparison of this method and a popular alternative, the Karni method, shows that subjects indeed find the frequency method easier to understand. Significantly, we show that confusion due to the complexity of the Karni method leads to less cognitively able subjects erroneously stating a belief of 50%, a bias not present in the frequency method.

Original languageEnglish
Pages (from-to)137 - 155
Number of pages19
JournalJournal of Risk and Uncertainty
Volume62
Issue number2
DOIs
Publication statusPublished - Apr 2021

Austrian Fields of Science 2012

  • 502057 Experimental economics
  • 502021 Microeconomics

Keywords

  • belief elicitation
  • experiment
  • frequency format
  • cognitive ability
  • NUMERACY
  • MECHANISM
  • Experiment
  • Cognitive ability
  • Frequency format
  • JUDGMENT
  • PROBABILITY
  • Belief elicitation
  • EQUILIBRIUM
  • FREQUENCY

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