WP 2012-09 Eliciting Subjective Probabilities with Binary Lotteries
Published in 2014 in Journal of Economic Behavior & Organization, Volume 101.
ABSTRACT. We evaluate the binary lottery procedure for inducing risk neutral behavior in a subjective belief elicitation task. Harrison, Martínez-Correa and Swarthout  found that the binary lottery procedure works robustly to induce risk neutrality when subjects are given one risk task defined over objective probabilities. Drawing a sample from the same subject population, we find evidence that the binary lottery procedure induces linear utility in a subjective probability elicitation task using the Quadratic Scoring Rule. We also show that the binary lottery procedure can induce direct revelation of subjective probabilities in subjects with certain Non-Expected Utility preference representations that satisfy weak conditions that we identify.