Browsing Research documents by Author "Rutström, E. Elisabet"
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Theory and ExperimentsAndersen, Steffen; Fountain, John; Harrison, Glenn W.; Rutström, E. Elisabet (, 2009)[More information][Less information]
Abstract: Subjective beliefs play a role in many economic decisions. There is a large theoretical literature on the elicitation of beliefs, and an equally large empirical literature. However, there is a gulf between the two. The theoretical literature proposes a range of procedures that can be used to recover beliefs, but stresses the need to make strong auxiliary assumptions or “calibrating adjustments” 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 need for calibration. We make three contributions to bridge this gulf. First, we offer a general theoretical framework in which the belief elicitation task can be viewed as an exchange of state-dependent commodities between two traders. Second, we provide a specific elicitation procedure which has clear counterparts in field betting environments, and that is directly motivated by our theoretical framework. Finally, we illustrate how one can jointly estimate risk attitudes and subjective beliefs using structural maximum likelihood methods. This allows the observer to make inferences about the latent 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 over three future events and one fact. URI: http://hdl.handle.net/10398/7799 Files in this item: 1
wp2009-3.pdf (2.043Mb) -
Andersen, Steffen; Fountain, John; Harrison, Glenn W.; Rutström, E. Elisabet (, 2009)[More information][Less information]
Abstract: It is intuitive that decision-makers might have attitudes towards uncertainty just as they might have attitudes towards risk. However, it is only recently that this intuitive notion has been formalized and axiomatically characterized. We estimate the extent of uncertainty aversion in a manner that is parsimonious and consistent with theory. We demonstrate that one can jointly estimate attitudes towards uncertainty, attitudes towards risk, and subjective probabilities in a rigorous manner. Our structural econometric model constructively demonstrates the theoretical claims that it is possible to define uncertainty aversion in an empirically tractable manner. Our results show that attitudes towards risk and uncertainty can be different, qualitatively and quantitatively, and that allowing for these differences can have significant effects on inferences about subjective probabilities. URI: http://hdl.handle.net/10398/7803 Files in this item: 1
wp2009-7.pdf (467.5Kb) -
Andersen, Steffen; Fountain, John; Harrison, Glenn W.; Rutström, E. Elisabet (, 2009)[More information][Less information]
Abstract: Subjective probabilities play a role in many economic decisions. There is a large theoretical literature on the elicitation of subjective probabilities, and an equally large empirical literature. However, there is a gulf between the two. The theoretical literature proposes a range of procedures that can be used to recover subjective probabilities, but stresses the need to make strong auxiliary assumptions or “calibrating adjustments” to elicited reports in order to recover the latent probability. With some notable exceptions, the empirical literature seems intent on either making those strong assumptions or ignoring the need for calibration. We illustrate how one can jointly estimate risk attitudes and subjective probabilities using structural maximum likelihood methods. This allows the observer to make inferences about the latent subjective probability, calibrating for virtually any well-specified model of choice under uncertainty. We demonstrate our procedures with experiments in which we elicit subjective probabilities. We calibrate the estimates of subjective beliefs assuming that choices are made consistently with expected utility theory or rank-dependent utility theory. Inferred subjective probabilities are significantly different when calibrated according to either theory. URI: http://hdl.handle.net/10398/7801 Files in this item: 1
wp2009-5.pdf (435.4Kb) -
Andersen, Steffen; Harrison, Glenn W.; Hole, Arne Risa; Rutström, E. Elisabet (, 2009)[More information][Less information]
Abstract: Experimental data exhibit considerable individual heterogeneity. We review the econometric methods employed to characterize that heterogeneity. We pay particular attention to the trade-off between collecting and allowing for observable characteristics, such as the familiar demographics, and the use of statistical methods to allow for unobserved individual heterogeneity. We demonstrate that these tools are complementary. URI: http://hdl.handle.net/10398/7802 Files in this item: 1
wp2009-6.pdf (420.1Kb)
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