Eliciting Beliefs in Continuous-Choice Games: a Double Auction Experiment
Journal
Experimental Economics
ISSN
1386-4157
ISSN-Digital
1573-6938
Type
journal article
Date Issued
2015-12-01
Author(s)
Abstract
This paper proposes a methodology to implement probabilistic belief
elicitation in continuous-choice games. Representing subjective
probabilistic beliefs about a continuous variable as a continuous subjective probability distribution, the methodology involves eliciting partial information about the subjective distribution and fitting a parametric distribution on the elicited data. As an illustration, the methodology is applied to a double auction experiment, where traders' beliefs about the bidding choices of other market participants are elicited. Elicited subjective beliefs are found to differ from proxies such as Bayesian
Nash Equilibrium (BNE) beliefs and empirical beliefs, both in terms
of the forecasts of other traders' bidding choices and in terms of the
best-response bidding choices prescribed by beliefs. Elicited subjective beliefs help explain observed bidding choices better than BNE beliefs and empirical beliefs. By extending probabilistic belief elicitation beyond discrete-choice games to continuous-choice games, the proposed methodology enables to investigate the role of beliefs in a wider range of applications.
elicitation in continuous-choice games. Representing subjective
probabilistic beliefs about a continuous variable as a continuous subjective probability distribution, the methodology involves eliciting partial information about the subjective distribution and fitting a parametric distribution on the elicited data. As an illustration, the methodology is applied to a double auction experiment, where traders' beliefs about the bidding choices of other market participants are elicited. Elicited subjective beliefs are found to differ from proxies such as Bayesian
Nash Equilibrium (BNE) beliefs and empirical beliefs, both in terms
of the forecasts of other traders' bidding choices and in terms of the
best-response bidding choices prescribed by beliefs. Elicited subjective beliefs help explain observed bidding choices better than BNE beliefs and empirical beliefs. By extending probabilistic belief elicitation beyond discrete-choice games to continuous-choice games, the proposed methodology enables to investigate the role of beliefs in a wider range of applications.
Language
English
Keywords
auctions
beliefs
subjective expectations
private information
experiments
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Quantitative Economic Methods
Refereed
Yes
Publisher
Springer Science + Business Media B.V.
Publisher place
Dordrecht
Volume
18
Number
4
Start page
569
End page
608
Pages
40
Subject(s)
Eprints ID
210729
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EWP-1207.pdf
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Format
Adobe PDF
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