Document Type
Article
Publication Date
9-1-2010
Abstract
We propose a method for estimating subjective beliefs, viewed as a subjective probability distribution. The key insight is to characterize beliefs as a parameter to be estimated from observed choices in a well-defined experimental task, and to estimate that parameter as a random coefficient. The experimental task consists of a series of standard lottery choices in which the subject is assumed to use conventional risk attitudes to select one lottery or the other, and then a series of betting choices in which the subject is presented with a range of bookies offering odds on the outcome of some event that the subject has a belief over. Knowledge of the risk attitudes of subjects conditions the inferences about subjective beliefs. Maximum simulated likelihood methods are used to estimate a structural model in which subjects employ subjective beliefs to make bets. We present evidence that some subjective probabilities are indeed best characterized as probability distributions with non-zero variance.
Recommended Citation
Andersen, Steffen; Fountain, John; Harrison, Glenn; Hole, Arne; and Rutström, Elisabet, "Inferring Beliefs as Subjectively Uncertain Probabilities" (2010). ExCEN Working Papers. 90.
https://scholarworks.gsu.edu/excen_workingpapers/90
Comments
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/.