Document Type

Article

Publication Date

9-1-2012

Abstract

We evaluate the binary lottery procedure for inducing risk neutral behavior in a subjective belief elicitation task. Harrison, Martínez-Correa and Swarthout [2013] found that the binary lottery procedure works robustly to induce risk neutrality when subjects are given one risk task defined over objective probabilities. Drawing a sample from the same subject population, we find evidence that the binary lottery procedure induces linear utility in a subjective probability elicitation task using the Quadratic Scoring Rule. We also show that the binary lottery procedure can induce direct revelation of subjective probabilities in subjects with certain Non-Expected Utility preference representations that satisfy weak conditions that we identify.

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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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