Measuring Beliefs Under Ambiguity
Published Online:1 Jul 2020https://doi.org/10.1287/opre.2020.1980
Abstract
This paper presents a simple method to measure the beliefs of a decision-maker with nonneutral ambiguity attitudes. Our method requires three simple choices, is incentive compatible, and allows for risk aversion and deviations from expected utility, including probability weighting and ambiguity aversion. An experiment using two natural sources of uncertainty (the temperature in Rotterdam and in New York City) shows that the model’s estimated beliefs are well calibrated, sensitive to the source of uncertainty, and similar to beliefs estimated by more sophisticated but time-consuming methods.
