Document Type

Article

Publication Date

4-1-2013

Abstract

The theoretical literature has a rich characterization of scoring rules for eliciting the subjective beliefs that an individual has for continuous events, but under the restrictive assumption of risk neutrality. It is well known that risk aversion can dramatically affect the incentives to correctly report the true subjective probability of a binary event, even under Subjective Expected Utility. To address this one can “calibrate” inferences about true subjective probabilities from elicited subjective probabilities over binary events, recognizing the incentives that risk averse agents have to distort reports. We characterize the comparable implications of the general case of a risk averse agent when facing a popular scoring rule over continuous events, and find that these concerns do not apply with anything like the same force. For empirically plausible levels of risk aversion, one can reliably elicit most important features of the latent subjective belief distribution without undertaking calibration for risk attitudes providing one is willing to assume Subjective Expected Utility.

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To learn more about the Andrew Young School of Policy Studies and ExCEN Working Papers Series, visit https://aysps.gsu.edu/ and http://excen.gsu.edu/center/.

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