Asymmetrically Dominated Choice Problems and Random Incentive Mechanisms
AbstractA common methodology in experimental research is the use of random incentive mechanisms. This note investigates possible distortion induced by such mechanisms in the context of choice under risk. In the baseline (one task) treatment of our experiment we observe risk behavior in a given choice problem. We show that by integrating a second, asymmetrically dominated choice problem in a random incentive mechanism behavior can be systematically manipulated. This implies that the isolation hypothesis is violated and the random incentive mechanism does not elicit true preferences in our example.
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Bibliographic InfoPaper provided by Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University in its series Experimental Economics Center Working Paper Series with number 2012-10.
Date of creation: Jun 2012
Date of revision:
random incentive mechanism; isolation; asymmetrically dominated alternatives;
Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-01 (All new papers)
- NEP-DCM-2012-07-01 (Discrete Choice Models)
- NEP-EXP-2012-07-01 (Experimental Economics)
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