Eliciting and estimating valid subjective probabilities: An experimental investigation of the exchangeability method

Simone Cerroni, Sandra Notaro and W. Shaw

Journal of Economic Behavior & Organization, 2012, vol. 84, issue 1, 201-215

Abstract: Using a laboratory experiment, we investigate whether incentive compatibility affects subjective probabilities elicited via the exchangeability method (EM), an elicitation technique consisting of several chained questions. We hypothesize that subjects who are aware of the chaining strategically behave and provide invalid subjective probabilities, while subjects who are not aware of the chaining state their real beliefs and provide valid subjective probabilities. The validity of subjective probabilities is investigated using de Finetti's notion of coherence, under which probability estimates are valid if and only if they obey all axioms of probability theory.

Keywords: Subjective probabilities; Exchangeability; Validity; Pesticide residue; Apples (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:84:y:2012:i:1:p:201-215

DOI: 10.1016/j.jebo.2012.08.001

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