In the upcoming AIRESS Research Seminar on Wednesday, April 30th at 12:30 p.m., Research and Education Fellow Yassine Kaouane will present his work on “Beliefs in Reciprocity, Confidence, and Trust.”

He will introduce a novel, incentive-compatible method to measure probabilistic beliefs from simple binary choices, tested in the context of trust and reciprocation.

ABSTRACT:

Probabilistic beliefs are key drivers of economic behaviour, yet incentive-compatible and easy-to-understand measures of beliefs have proved elusive. We develop a novel method that allows us to econometrically recover probabilistic beliefs from simple binary choices between bets on different events. The method is incentive-compatible under all major models of decision-making, and easy to understand for subjects. We test the method by eliciting beliefs about the reciprocation of trust. The mean belief we elicit predicts trust, and performs slightly better than commonly used qualitative and quantitative survey questions. Further adding confidence in beliefs describing the belief distribution improves the performance of our measure dramatically. This shows the promise of the method for applied work.