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Random incentive systems in a dynamic choice experiment

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  • Guido Baltussen
  • G. Post
  • Martijn Assem

    ()

  • Peter Wakker

Abstract

Experiments frequently use a random incentive system (RIS), where only tasks that are randomly selected at the end of the experiment are for real. The most common type pays every subject one out of her multiple tasks (within-subjects randomization). Recently, another type has become popular, where a subset of subjects is randomly selected, and only these subjects receive one real payment (between-subjects randomization). In earlier tests with simple, static tasks, RISs performed well. The present study investigates RISs in a more complex, dynamic choice experiment. We find that between-subjects randomization reduces risk aversion. While within-subjects randomization delivers unbiased measurements of risk aversion, it does not eliminate carry-over effects from previous tasks. Both types generate an increase in subjects’ error rates. These results suggest that caution is warranted when applying RISs to more complex and dynamic tasks. Copyright The Author(s) 2012

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Bibliographic Info

Article provided by Springer in its journal Experimental Economics.

Volume (Year): 15 (2012)
Issue (Month): 3 (September)
Pages: 418-443

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Handle: RePEc:kap:expeco:v:15:y:2012:i:3:p:418-443

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Web page: http://www.springerlink.com/link.asp?id=102888

Related research

Keywords: Random incentive system; Incentives; Experimental measurement; Risky choice; Risk aversion; Dynamic choice; Tremble; Within-subjects design; Between-subjects design; C91; D81;

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Cited by:
  1. Vieider, Ferdinand M. & Chmura, Thorsten & Martinsson, Peter, 2012. "Risk attitudes, development, and growth: Macroeconomic evidence from experiments in 30 countries," Discussion Papers, WZB Junior Research Group Risk and Development SP II 2012-401, Social Science Research Center Berlin (WZB).
  2. Mohammed Abdellaoui & Han Bleichrodt & Olivier l’Haridon, 2013. "Sign-dependence in intertemporal choice," Journal of Risk and Uncertainty, Springer, vol. 47(3), pages 225-253, December.
  3. Seda Ertac & Mehmet Y. Gurdal, 2012. "Personality, Group Decision-Making and Leadership," Koç University-TUSIAD Economic Research Forum Working Papers 1227, Koc University-TUSIAD Economic Research Forum.
  4. Di Bartolomeo Giovanni & Papa Stefano & Bellomo Saverio, 2012. "Yoga beyond wellness: Meditation, trust and cooperation," wp.comunite 0095, Department of Communication, University of Teramo.
  5. Klemens Keldenich, 2012. "Group Membership and Communication in Modified Dictator Games," Ruhr Economic Papers 0322, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  6. Vieider, Ferdinand M. & Cingl, Lubomír & Martinsson, Peter & Stojic, Hrvoje, 2013. "Separating attitudes towards money from attitudes towards probabilities: Stake effects and ambiguity as a test for prospect theory," Discussion Papers, WZB Junior Research Group Risk and Development SP II 2013-401, Social Science Research Center Berlin (WZB).
  7. Sujoy Mukerji & Robin Cubitt & Gijs van de Kuilen, 2014. "Discriminating between Models of Ambiguity Attitude: A Qualitative Test," Economics Series Working Papers 692, University of Oxford, Department of Economics.
  8. Jeannette Brosig-Koch & Heike Hennig-Schmidt & Nadja Kairies & Daniel Wiesen, 2013. "How Effective are Pay-for-Performance Incentives for Physicians? – A Laboratory Experiment," Ruhr Economic Papers 0413, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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