Eliciting Subjective Probabilities through Pair‐wise Comparisons

We propose and test a novel approach for eliciting subjective joint probabilities. In the proposed approach, judges compare pairs of possible outcomes and identify which of the two is more likely and by how much. These pair‐wise comparative judgments create a matrix of ratio judgments from which the target probabilities are extracted using the rows' (or columns') geometric means. In Study 1, subjects provided direct assessments of the likelihood of joint events (e.g., sunny days and stock market gains) and also made pair‐wise comparisons of the same joint events. Subjects in Study 2 learnt the distribution of hypothetical events pairs and provided direct and ratio estimates. In both studies, the ratio estimates were significantly more accurate than the direct estimates. The results suggest that it is possible to elicit probabilistic estimates without explictly asking for probabilities and that the pair‐wise approach is a candidate for complementing or replacing traditional elicitation approaches. Copyright © 2016 John Wiley & Sons, Ltd.