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Lossed in translation: an off-the-shelf method to recover probabilistic beliefs from loss-averse agents
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- Journal:
- Experimental Economics / Volume 19 / Issue 1 / March 2016
- Published online by Cambridge University Press:
- 14 March 2025, pp. 1-30
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- Article
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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
, and (ii) for moderate beliefs agents simply report 
. 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.
