Journal ArticleDOI
Using experimental economics to evaluate alternative subjective elicitation procedures
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In this paper, a web-based software was developed and incentive-compatible rewards were applied to participants in order to induce rational decision-making in a controlled economic experiment, where participants assessed data drawn from known distributions and then responded to a subjective probability elicitation.Abstract:
Managing uncertainty is an unavoidable challenge in a variety of decision contexts. If empirical data are available, statistics can be used to assist decision-making. If objective data are absent, experts are commonly used as a source of subjective probability estimates about the variable of interest. In our controlled economic experiment, a web-based software was developed and incentive-compatible rewards were applied to participants in order to induce rational decision-making. Participants assessed data drawn from known distributions and then responded to a subjective probability elicitation. The empirical results provide experimentally based guidance on elicitation and aggregation techniques that yield the most accurate subjective estimates of unknown probabilities. The results can be applied to a wide array of decision-making processes involving subjective probability analysis.read more
Citations
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Journal ArticleDOI
Are Business Management Games a Suitable Tool for Analyzing the Boundedly Rational Behavior of Economic Agents
TL;DR: In this paper, an existing business management game in which investment, financing and produc tion decisions have to be made is modified and bounded rationality can be quantified and separated into its two components: incomplete information and limited cognitive abilities.
Essays on the El Niño Anomaly and Stock Return Predictability
TL;DR: Yang et al. as mentioned in this paper examined the impact of the El Niño phenomenon on the international stock market, both at the aggregate level and the portfolio level, and found that the effect is stronger in January and February than in December.
Journal ArticleDOI
Risk Preferences in Future Military Leaders
Abstract: Although hundreds of studies have demonstrated that risk preferences shape people’s choices under uncertainty, the complexity of how attitudes toward risk play out across various pivotal settings and key populations leaves considerable gaps in knowledge. We study a unique sample of a cohort of future military leaders at the United States Military Academy (West Point), nearly all of whom now hold commissions in the US Army officer corps. Using a hypothetical instrument to elicit preferences across a variety of domains, we find that cadets are risk averse, on average, which has potentially important implications for future management of military conflicts and programs. Our results also show that diversity programs aimed at increasing the number of women and minorities at West Point are likely to increase the average level of risk aversion within the officer corps. This finding suggests that working with officers to strengthen cognitive flexibility and to be attuned to a possible wedge between their innate preferences and the needs of the situation may be important, particularly for those who wish to enter occupational fields where the willingness to take risks is critical.
References
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Book
Judgment Under Uncertainty: Heuristics and Biases
Amos Tversky,Daniel Kahneman +1 more
TL;DR: The authors described three heuristics that are employed in making judgements under uncertainty: representativeness, availability of instances or scenarios, and adjustment from an anchor, which is usually employed in numerical prediction when a relevant value is available.
Journal ArticleDOI
Judgment Under Uncertainty: Heuristics and Biases.
TL;DR: Three heuristics that are employed in making judgements under uncertainty are described: representativeness, availability of instances or scenarios, which is often employed when people are asked to assess the frequency of a class or the plausibility of a particular development.
Book
Uncertainty: A Guide to Dealing with Uncertainty in Quantitative Risk and Policy Analysis
TL;DR: In this paper, the authors present a software tool for uncertainty analysis, called Analytica, for quantitative policy analysis, which can be used to perform probability assessment and propagation and analysis of uncertainty.
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