Estimating Second Order Probability Beliefs from Subjective Survival Data

TitleEstimating Second Order Probability Beliefs from Subjective Survival Data
Publication TypeReport
Year of Publication2012
AuthorsHudomiet, P, Willis, RJ
InstitutionCambridge, Mass., National Bureau of Economic Research
KeywordsMethodology
Abstract

Based on subjective survival probability questions in the Health and Retirement Study, we use an econometric model to estimate the determinants of individual-level uncertainty about personal longevity. This model is built around the Modal Response Hypothesis (MRH), a mathematical expression of the idea that survey responses of 0, 50 or 100 percent to probability questions indicate a high level of uncertainty about the relevant probability. We show that subjective survival expectations in 2002 line up very well with realized mortality of the HRS respondents between 2002 and 2010. We show that the MRH model performs better than typically used models in the literature of subjective probabilities. Our model gives more accurate estimates of low probability events and it is able to predict the unusually high fraction of focal 0, 50 and 100 answers observed in many datasets on subjective probabilities.

URLhttp://www.nber.org/papers/w18258
Endnote Keywords

Demographic Economics./Bayesian Analysis/survival probabilities/survey response/Modal response hypothesis

Endnote ID

69050

Citation Key5931