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Separated decisions

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  • Brown, Alexander L.
  • Healy, Paul J.

Abstract

We use experiments to test the incentive compatibility of the “random problem selection” payment mechanism, in which only one choice out of many is randomly chosen for payment. We find that the mechanism is not incentive compatible when all decisions are shown together in a single list. But when the rows of the list are randomized and shown on separate screens, incentive compatibility is restored. This causes more apparent intransitivities in choice (“multiple switching”), but, since the experiment is incentive compatible, these intransitivities must be inherent in subjects’ preferences.

Suggested Citation

  • Brown, Alexander L. & Healy, Paul J., 2018. "Separated decisions," European Economic Review, Elsevier, vol. 101(C), pages 20-34.
  • Handle: RePEc:eee:eecrev:v:101:y:2018:i:c:p:20-34
    DOI: 10.1016/j.euroecorev.2017.09.014
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Payment mechanism; Experimental methodology; Monotonicity; Decisions under uncertainty;

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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