Belief Elicitation in Experiments: Is there a Hedging Problem?

Mariana Blanco (), Dirk Engelmann (), Alexander Karl Koch () and Hans-Theo Normann ()
Additional contact information
Mariana Blanco: Royal Holloway, University of London

No 3517, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: Belief elicitation in economics experiments usually relies on paying subjects according to the accuracy of stated beliefs in addition to payments for other decisions. Such incentives, however, allow risk-averse subjects to hedge with their stated beliefs against adverse outcomes of other decisions in the experiment. This raises two questions: (i) can we trust the existing belief elicitation results, (ii) can we avoid potential hedging confounds? Our results instill confidence regarding both issues. We propose an experimental design that eliminates hedging opportunities, and use this to test for the empirical relevance of hedging effects in the lab. We find no evidence for hedging, comparing the standard “hedging-prone” belief elicitation treatment to a “hedging-proof” design in a sequential prisoners’ dilemma game. Our findings are strengthened by the absence of hedging even in an additional non-belief elicitation treatment using a financial investment frame, where hedging arguably would be most natural.

Keywords: belief elicitation; hedging; methods; experimental economics (search for similar items in EconPapers)
JEL-codes: C72 C90 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-gth
Date: 2008-05
View list of references View citations in EconPapers

Downloads: (external link)
http://ftp.iza.org/dp3517.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:iza:izadps:dp3517

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute for the Study of Labor (IZA)
Address: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Contact information at EDIRC.
Series data maintained by Mark Fallak ().