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Asymmetrically dominated alternatives and random incentive mechanisms

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  • Schmidt, Ulrich

Abstract

This note presents an experimental study of the random lottery incentive mechanism. In the baseline treatment 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 risk behavior can be manipulated systematically. This implies that the isolation hypothesis is violated the random incentive mechanism does not elicit true preferences.

Suggested Citation

  • Schmidt, Ulrich, 2010. "Asymmetrically dominated alternatives and random incentive mechanisms," Kiel Working Papers 1646, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:1646
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    References listed on IDEAS

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    More about this item

    Keywords

    Random incentive mechanism; isolation; asymmetrically dominated alternatives;
    All these keywords.

    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

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