Lossed in translation: an off-the-shelf method to recover probabilistic beliefs from loss-averse agents

Strictly proper scoring rules are designed to truthfully elicit subjective probabilistic beliefs from risk neutral agents. Previous experimental studies have identified two problems with this method: (i) risk aversion causes agents to bias their reports toward the probability of [Formula: see text] , and (ii) for moderate beliefs agents simply report [Formula: see text] . Applying a prospect theory model of risk preferences, we show that loss aversion can explain both of these behavioral phenomena. Using the insights of this model, we develop a simple off-the-shelf probability assessment mechanism that encourages loss-averse agents to report true beliefs. In an experiment, we demonstrate the effectiveness of this modification in both eliminating uninformative reports and eliciting true probabilistic beliefs. ELECTRONIC SUPPLEMENTARY MATERIAL: The online version of this article (doi:10.1007/s10683-015-9429-0) contains supplementary material, which is available to authorized users.