Estimating Subjective Probabilities


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Estimating Subjective Probabilities

Show simple item record Andersen, Steffen Fountain, John Harrison, Glenn W. Rutström, E. Elisabet 2009-05-28 2009-05-28T09:02:48Z 2009-05-28T09:02:48Z 2009-05-28T09:02:48Z
dc.description.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. en_US
dc.format.extent 68 s. en_US
dc.language eng en_US
dc.relation.ispartofseries Working paper;2009-05
dc.title Estimating Subjective Probabilities en_US
dc.type wp en_US
dc.accessionstatus modt09maj28 nijemo en_US
dc.contributor.corporation Copenhagen Business School. CBS en_US
dc.contributor.department Økonomisk Institut en_US
dc.contributor.departmentshort ECON en_US
dc.contributor.departmentuk Department of Economics en_US
dc.contributor.departmentukshort ECON en_US
dc.idnumber x656597371 en_US
dc.publisher.year 2009 en_US

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