Eliciting Second-Order Beliefs
Subir Bose and
Additional contact information
Subir Bose: University of Leicester
Arup Daripa: Birkbeck, University of London
No 1710, Birkbeck Working Papers in Economics and Finance from Birkbeck, Department of Economics, Mathematics & Statistics
We study elicitation of subjective beliefs of an agent facing ambiguity (model uncertainty): the agent has a non-singleton set of (first-order) priors on an event and a second-order prior on these first-order belief-states. Such a two-stage decomposition of uncertainty and non-reduction of compound lotteries resulting from nonneutrality to the second-order distribution plays an important role in resolving the Ellsberg Paradox. The problem of eliciting beliefs on unobservable belief-states with ambiguity-sensitive agents is novel, and we introduce new elicitation techniques using report-dependent prize variations. We construct a direct revelation mechanism that induces truthful reporting of the first-order belief states as well as the secondorder distribution on the belief-states as the unique best response. The technique requires knowledge of the sensitivity function to second-order distribution (capturing ambiguity attitude) and the vN-M utility function, which we also elicit.
Keywords: Ambiguity; second-order beliefs; elicitation of second-order beliefs (support and distribution); Klibanoff-Marinacci-Mukerji (2005) representation; elicitation of second-order-distribution-sensitivity function; elicitation of the vN-M utility function. (search for similar items in EconPapers)
JEL-codes: D81 D82 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic and nep-upt
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://www.bbk.ac.uk/ems/research/wp/2017/PDFs/BWPEF1710.pdf First version, 2017 (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bbk:bbkefp:1710
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Birkbeck Working Papers in Economics and Finance from Birkbeck, Department of Economics, Mathematics & Statistics Malet Street, London WC1E 7HX, UK.
Bibliographic data for series maintained by ().