WP 2020-22 Subjective Beliefs and Economic Preferences During the COVID-19 Pandemic
AUTHORS: Glenn W. Harrison, Andre Hofmeyr, Harold Kincaid, Brian Monroe, Don Ross, Mark Schneider and J. Todd Swarthout
ABSTRACT: The COVID-19 pandemic presents a remarkable opportunity to put to work all of the research that has been undertaken in past decades on the elicitation and structural estimation of subjective belief distributions as well as preferences over atemporal risk, patience, and intertemporal risk aversion. As contributors to elements of that research in laboratories and the field, we drew together those methods and applied them to an online, incentivized experiment in the United States. We have two major findings. First, the atemporal risk premium during the COVID-19 pandemic appeared to change significantly compared to before the pandemic, consistent with theoretical results of the effect of increased background risk on foreground risk attitudes. Second, subjective beliefs about the cumulative level of infections and deaths evolved dramatically over the period between May and November 2020, a volatile one in terms of the background evolution of the pandemic. These results point to rich hypotheses to be explored further with the extensive data we have collected. The online infrastructure for incentivized experiments we developed may also be of lasting value to others in the future.