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Do decision makers have subjective probabilities? An experimental test

Author

Listed:
  • David Ronayne

    (ESMT European School of Management and Technology GmbH)

  • Roberto Veneziani

    (Queen Mary University of London)

  • William R. Zame

    (University of California at Los Angeles)

Abstract

Anscombe & Aumann (1963) offer a definition of subjective probability in terms of comparisons with objective probabilities. That definition - which has provided the basis for much of the succeeding work on subjective probability - presumes that the subjective probability of an event is independent of the prize consequences of that event, a property we term Prize Independence. We design experiments to test Prize Independence and find that a large fraction of our subjects violate it; thus, they do not have subjective probabilities. These findings raise questions about the empirical relevance of much of the literature on subjective probability.

Suggested Citation

  • David Ronayne & Roberto Veneziani & William R. Zame, 2022. "Do decision makers have subjective probabilities? An experimental test," ESMT Research Working Papers ESMT-22-03, ESMT European School of Management and Technology.
    • Handle: RePEc:esm:wpaper:esmt-22-03
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    subjective probability; choice under uncertainty; online experiments;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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