Preference and Belief: Ambiguity and Competence in Choice under Uncertainty.

We investigate the relation between judgments of probability and preferences between bets. A series of experiments provides support for the competence hypothesis that people prefer betting on their own judgment over an equiprobable chance event when they consider themselves knowledgeable, but not otherwise. They even pay a significant premium to bet on their judgments. These data cannot be explained by aversion to ambiguity, because judgmental probabilities are more ambiguous than change events. We interpret the results in terms of the attribution of credit and blame. The possibility of inferring beliefs from preferences is questioned. Copyright 1991 by Kluwer Academic Publishers