Identification of misreported beliefs

Abstract

It is well-known that subjective beliefs cannot be identified with traditional choice data unless we impose the strong assumption that preferences are state-independent. This is seen as one of the biggest pitfalls of incentivized belief elicitation. The two common approaches are either to exogenously assume that preferences are state-independent, or to use intractable elicitation mechanisms that require an awful lot of hard-to-get non-traditional choice data. In this paper we use a third approach, introducing a novel methodology that retains the simplicity of standard elicitation mechanisms without imposing the awkward state-independence assumption. The cost is that instead of insisting on full identification of beliefs, we seek identification of misreporting. That is, we elicit beliefs with a standard simple elicitation mechanism, and then by means of a single additional observation we can tell whether the reported beliefs deviate from the actual beliefs, and if so, in which direction they do.