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Central tendency bias in belief elicitation

Author

Listed:
  • Paolo Crosetto

    (GAEL - Laboratoire d'Economie Appliquée de Grenoble - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UGA [2016-2019] - Université Grenoble Alpes [2016-2019], INRA - Institut National de la Recherche Agronomique)

  • Antonio Filippin

    (UNIMI - Università degli Studi di Milano = University of Milan)

  • Katuščák Peter

    (RWTH - Rheinisch-Westfälische Technische Hochschule Aachen University)

  • John Smith

    (Rutgers University [Camden] - Rutgers - Rutgers University System)

Abstract
We conduct an experiment in which subjects participate in a first-price auction against an automaton that bids randomly in a given range. The subjects first place a bid in the auction. They are then given an incentivized elicitation of their beliefs of the opponent's bid. Despite having been told that the bid of the opponent was drawn from a uniform distribution, we find that most of the subjects report beliefs that have a peak in the interior of the range. The result is robust across seven different experimental treatments. While not expected at the outset, these single-peaked beliefs have precedence in the experimental psychology judgments literature. Our results suggest that an elicitation of probability beliefs can result in responses that are more concentrated than the objectively known or induced truth. We provide indicative evidence that such individual belief reports can be rationalized by well-defined subjective beliefs that differ from the objective truth. Our findings offer an explanation for the conservatism and overprecision biases in Bayesian updating. Finally, our findings suggest that probabilistic forecasts of uncertain events might have less variance than the actual events.

Suggested Citation

  • Paolo Crosetto & Antonio Filippin & Katuščák Peter & John Smith, 2019. "Central tendency bias in belief elicitation," Working Papers hal-02308641, HAL.
    • Handle: RePEc:hal:wpaper:hal-02308641
    Note: View the original document on HAL open archive server: https://hal.univ-grenoble-alpes.fr/hal-02308641
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    File URL: https://hal.univ-grenoble-alpes.fr/hal-02308641/document
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    References listed on IDEAS

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    Cited by:

    1. Folli, Dominik & Wolff, Irenaeus, 2022. "Biases in belief reports," Journal of Economic Psychology, Elsevier, vol. 88(C).
    2. Sean Duffy & John Smith, 2020. "On the category adjustment model: another look at Huttenlocher, Hedges, and Vevea (2000)," Mind & Society: Cognitive Studies in Economics and Social Sciences, Springer;Fondazione Rosselli, vol. 19(1), pages 163-193, June.
    3. Burdea, Valeria & Woon, Jonathan, 2022. "Online belief elicitation methods," Journal of Economic Psychology, Elsevier, vol. 90(C).
    4. Hartwig, Fredrik & Landström, Mats & Sörqvist, Patrik, 2022. "Averaging bias in firm acquisition processes," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    5. Irenaeus Wolff, 2023. "Heuristic Centered-Belief Players," TWI Research Paper Series 128, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    6. Øivind Schøyen, 2024. "Suspicious minds and views of fairness," Theory and Decision, Springer, vol. 97(1), pages 67-88, August.
    7. Collins, Sean M. & James, Duncan, 2024. "Hidden in plain sight: Payoffs, probability, space, and time in isomorphic tasks," Games and Economic Behavior, Elsevier, vol. 145(C), pages 117-136.

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    More about this item

    Keywords

    belief elicitation; quadratic scoring rule; overprecision; conservatism;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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