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Experimental elicitation of ambiguity attitude using the random incentive system

Author

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  • Aurélien Baillon

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique, EM - EMLyon Business School)

  • Yoram Halevy
  • Chen Li

Abstract

We demonstrate how the standard usage of the random incentive system in ambiguity experiments eliciting certainty and probability equivalents might not be incentive compatible if the decision-maker is ambiguity averse. We propose a slight modification of the procedure in which the randomization takes place before decisions are made and the state is realized, and prove that if subjects evaluate the experimental environment in that way (first - risk, second - uncertainty), incentive compatibility may be restored.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Aurélien Baillon & Yoram Halevy & Chen Li, 2022. "Experimental elicitation of ambiguity attitude using the random incentive system," Post-Print halshs-03908449, HAL.
    • Handle: RePEc:hal:journl:halshs-03908449
    DOI: 10.1007/s10683-021-09739-2
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    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • 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

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