Expectations: Point-Estimates, Probability Distributions, Confidence, and Forecasts

Abstract

In this article I test a new interactive web-based interface that captures both “bestestimate” point-estimates and probability distributions from non-experts. As in the previousliterature, respondents are overconfident. My innovation is to show that in contrast to standardmethods of directly asking respondents to state their confidence, using my method, whichinduces the respondents to reveal confidence, there is a sizable and statically significant positive relationship between confidence and the accuracy of individual-level expectations. This positive correlation between confidence and accuracy can be utilized to create confidence-weighted aggregated forecasts that are more accurate than the standard “consensus forecasts.” The payment of financial incentives does not affect these findings.