Belief Elicitation with a Synchronized Lottery Choice Menu that is Invariant to Risk Attitudes

Article
Author:Holt, Charles, AS-EconomicsUniversity of Virginia
Abstract:

Belief Elicitation with a Synchronized Lottery Choice Menu
that is Invariant to Risk Attitudes

By Charles A. Holt and Angela M. Smith

This paper uses a Bayesian information processing task to compare belief elicitation mechanisms including a quadratic scoring rule, a Becker-DeGroot-Marschak pricing procedure, and a two-stage menu of lottery choices that is structured to identify a precise point of probability indifference. The choice menu yields a higher incidence of correct Bayesian responses and lower belief error averages. Unlike the quadratic scoring rule, the binary payoffs for the lottery choice mechanism are synchronized to provide theoretical incentive-compatibility regardless of risk attitudes. In addition, the choice menu structure is more transparent and intuitive than the Becker-DeGroot-Marschak procedure.

Keywords:
belief elicitation, BDM, Lottery Choice, BDM, risk aversion
Contributor:Holt, Charles, EconomicsUniversity of Virginia
Language:
English
Source Citation:

Charles Holt Angela Smith (2016) “Belief Elicitation with a Simple Lottery Choice Menu: Invariant to Risk Preferences,” AEJ Micro, 8 (1), 110-139.

Publisher:
University of Virginia
Published Date:
2016