De Finetti’s Methods of Elicitation

Joseph B. Kadane and Robert L. Winkler
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Joseph B. Kadane: Carnegie-Mellon University, Department of Statistics
Robert L. Winkler: Duke University, Fuqua School of Business

A chapter in Probability and Bayesian Statistics, 1987, pp 279-284 from Springer

Abstract: Abstract De Finetti (1974) uses payoffs through promissory notes, bets, or scoring rules in the elicitation of an expert’s probabilities and introduces his “hypothesis of rigidity” to argue that as long as the payoffs are small, nonlinearities in the expert’s utility function can be ignored for practical purposes. In an analysis considering not just the elicitation-related payoffs, but all uncertainties related to the expert’s fortune, we find that the hypothesis of rigidity is not sufficient to eliminate the impact of the utility function in probability elicitation. We propose an “extended hypothesis of rigidity” that adds an extra condition to de Finetti’s hypothesis. The extra assumption is that, ignoring elicitation-related payoffs, the fortune of the expert is independent of the events for which probabilities are being elicited.

Keywords: Original Hypothesis; Price Ratio; Elicitation Method; Extra Assumption; Indifference Price (search for similar items in EconPapers)
Date: 1987
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-1-4613-1885-9_29

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DOI: 10.1007/978-1-4613-1885-9_29

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