Using Expectations Data to Study Subjective Income Expectations

We have collected data on the one-year-ahead income expectations of members of American households in our Survey of Economic Expectations (SEE), a module of a national continuous telephone survey conducted at the University of Wisconsin. The income- expectations questions take this form: "What do you think is the percent chance (or what are the chances out of 100) that your total household income, before taxes, will be less than Y over the next 12 months?" We use the responses to a sequence of such questions posed for different income thresholds Y to estimate each respondent's subjective probability distribution for next year's household income. We use the estimates to study the cross-sectional variation in income expectations one year into the future.

Actions and Beliefs: Estimating Distribution-Based Preferences Using a Large Scale Experiment with Probability Questions on Expectations

We combine the choice data of proposers and responders in the ultimatum game, their expectations elicited in the form of subjective probability questions, and the choice data of proposers ("dictator") in a dictator game to estimate a structural model of decision making under uncertainty.We use a large and representative sample of subjects drawn from the Dutch population.Our results indicate that there is considerable heterogeneity in preferences for equity in the population.Changes in preferences have an important impact on decisions of dictators in the dictator game and responders in the ultimatum game, but a smaller impact on decisions of proposer's in the ultimatum game, a result due to proposers subjective expectations about responders' decisions.The model which uses subjective data on expectations has better predictive power and lower noise level than a model which assumes that players have rational expectations.ultimatum game;inquity aversion;subjective expectations

Actions and Beliefs: Estimating Distribution-Based Preferences Using a Large Scale Experiment with Probability Questions on Expectations

We combine the choice data of proposers and responders in the ultimatum game, their expectations elicited in the form of subjective probability questions, and the choice data of proposers ("dictators") in a dictator game to estimate a structural model of decision making under uncertainty. We use a large and representative sample of subjects drawn from the Dutch population. Our results indicate that there is considerable heterogeneity in preferences for equity in the population. Changes in preferences have an important impact on decisions of dictators in the dictator game and responders in the ultimatum game, but a smaller impact on decisions of proposers in the ultimatum game, a result due to proposer's subjective expectations about resopnders' decisions. The model which uses subjective data on expectations has better predictive power and lower noise level than a model which assumes that players have rational expectations.Ultimatum game, inequity aversion, subjective expectations

Fears and realisations of employment insecurity

We investigate the validity of subjective data expectations of job loss and on the probability of re-employment consequent on job loss, by examining associations between expectations and realisations. We find that subjective expectations data reveal private information about subsequent job loss, the expectations data perform better with numerical descriptors than with ordinal verbal descriptors. On average, employees overestimate the chance of losing their job; while they underestimate the difficulty of finding another job as good as the currently-held one. We recommend that survey items on employment insecurity should be explicit about each risk investigation, and utilise a cardinal probability scale with discrete numerical descriptors

A COMPARISON OF SUBJECTIVE AND HISTORICAL CROP YIELD PROBABILITY DISTRIBUTIONS

Forecast distributions based on historical yields and subjective expectations for 1987 expected crop yields were compared for 90 Western Kentucky grain farms. Different subjective probability elicitation techniques were also compared. In many individual cases, results indicate large differences between subjective and empirical moments. Overall, farmer expectations for 1987 corn yields were below those predicted from their past yields, while soybean expectations were above the historical forecast. Geographical location plays a larger role than crop in comparisons of relative variability of yield. Neither elicitation technique nor manager characteristics have significant effects on the comparisons of the forecasts.Crop Production/Industries,

Using expectations data to study subjective income expectations

We have collected data on the one-year-ahead income expectations of members of American households in our Survey of Economic Expectations (SEE), a module of a national continuous telephone survey conducted at the University of Wisconsin. The income-expectations questions take this form: "What do you think is the percent chance (or what are the chances out of 100) that your total household income, before taxes, will be less than Y over the next 12 months?" We use the responses to a sequence of such questions posed for different income thresholds Y to estimate each respondent's subjective probability distribution for next year's household income. We use the estimates to study the cross- sectional variation in income expectations one year into the future.

Subjective Stock Market Expectations and Portfolio Choice.

Stock market; Portfolio selection; subjective beliefs;

Subjective Income Expectations, Canonical Models and Income Risk

Expectations are central to behaviour. Despite the existence of subjective expectations data, the standard approach is to ignore these, to hypothecate a model of behaviour and to infer expectations from realisations. In the context of income models, we reveal the informational gain obtained from using both a canonical model and subjective expectations data. We propose a test for this informational gain, and illustrate our approach with an application to the problem of measuring income risk.subjective expectation data, canonical income models, income risk.

Actions and Beliefs: Estimating Distribution-Based Preferences Using a Large Scale Experiment with Probability Questions on Expectations

We combine the choice data of proposers and responders in the ultimatum game, their expectations elicited in the form of subjective probability questions, and the choice data of proposers (é›»ictators- in a dictator game to estimate a structural model of decision making under uncertainty. We use a large and representative sample of subjects drawn from the Dutch population. Our results indicate that there is considerable heterogeneity in preferences for equity in the population. Changes in preferences have an important impact on decisions of dictators in the dictator game and responders in the ultimatum game, but a smaller impact on decisions of proposers in the ultimatum game, a result due to proposer's subjective expectations about responders-decisions. The model which uses subjective data on expectations has better predictive power and lower noise level than a model which assumes that players have rational expectations.

Subjective expectations in the context of HIV/AIDS in Malawi

In this paper we present a newly developed interactive elicitation methodology for collecting probalistic in expectations in a developing country context with low levels of literacy and numeracy, and we evaluate the feasibility and success of this method for a wide range of outcomes in rural Malawi. We find that respondents' answers about their subjective expectations take into account basic properties of probabilities, and vary meaningfully with observable characteristics and past experience. From a substantive point of view, the elicited expectation's indicate that individuals are generally aware of differential risks. For example, individuals with lower incomes and less land rightly feel at greater risk of financial distress than people with higher socioeconomic status (SES), and people who are divorced or widowed rightly feel at greater risk of being infected with HIV than currently married individuals. Meanwhile many expectations - including the probability of being currently infected with HIV - are well-calibrated compared to actual probabilities, but mortality expectations are substantially overestimated compared to life table estimates. This overestimation maylead individuals to underestimate the benefits of adopting HIV risk-reduction strategies. The skewed distribution, of expectations about condom use also suggests that a small group of innovators are the forerunners in the adoption of condoms within marriage for HIV prevention. © 2009 Adeline Delavande & Hans-Peter Kohler