TY  - RPRT
        AU  - Bellemare, Charles
AU  - Bissonnette, Luc
AU  - Kröger, Sabine
        TI  - Flexible Approximation of Subjective Expectations Using Probability Questions: An Application to the Investment Game
        PY  - 2007/Oct/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 3121
        UR  - https://www.iza.org/publications/dp3121
        AB  - We use spline interpolation to approximate the subjective cumulative distribution function of an economic agent over the future realization of a continuous (possibly censored) random variable. The method proposed exploits information collected using a small number of probability questions on expectations and requires a weak prior knowledge of the shape of the underlying distribution. We find that eliciting 4 or 5 points on the cumulative distribution function of an agent is sufficient to accurately approximate a wide variety of underlying distributions. We show that estimated moments of general functions of the random variable can be computed analytically and/or using standard simulation techniques. We illustrate the usefulness of the method by estimating a simple model to asses the impact of expectations on investment decisions in a commonly used trust game.
        KW  - decision making under uncertainty
KW  - approximation of subjective expectations
KW  - spline interpolation
        ER  -