title: Lossed in translation: an off-the-shelf method to recover probabilistic beliefs from loss-averse agents.
abstract: Strictly proper scoring rules are designed to truthfully elicit subjective probabilistic beliefs from risk neutral agents. Previous experimental studies have identified two problems with this method: (i) risk aversion causes agents to bias their reports toward the probability of [Formula: see text], and (ii) for moderate beliefs agents simply report [Formula: see text]. Applying a prospect theory model of risk preferences, we show that loss aversion can explain both of these behavioral phenomena. Using the insights of this model, we develop a simple off-the-shelf probability assessment mechanism that encourages loss-averse agents to report true beliefs. In an experiment, we demonstrate the effectiveness of this modification in both eliminating uninformative reports and eliciting true probabilistic beliefs.
authors.affiliation: CREED, University of Amsterdam, Roetersstraat 11, 1018 WB Amsterdam, The Netherlands.
authors.forename: Theo
authors.initials: T
authors.lastname: Offerman
authors.affiliation: The Fuqua School of Business, Duke University, 100 Fuqua Drive, Box 90120, Durham, NC 27708 USA.
authors.forename: Asa B
authors.initials: AB
authors.lastname: Palley
keywords: Loss aversion; Prospect theory; Scoring rule; Subjective probability assessment