Do subjects remember the past?
In many experiments, experimenters use the random lottery incentive mechanism and ask many questions to each subject. That is, at the end of the experiment, just one of the questions is picked at random, and the subject paid on the basis of their answer to this one question. The idea is that subjects should separate the various questions and reply to each as if it were a separate question. This procedure is methodologically sound if the subjects' preferences obey Expected Utility (EU) theory (which implies a form of separation), but if they do not, this incentive mechanism is open to criticism. Indeed many referees use this argument against the research: they argue that subjects do not consider questions separately. If the questions are revealed to the subjects one by one, then the appropriate alternative hypothesis is that their behaviour evolves with the questions. Here this hypothesis is tested: that the questions already answered affect the answers to the subsequent questions. The analysis shows that this is generally not the case. This finding is of importance not only for the experimental community, but also for the wider community of economists - who typically, when analysing economic data, have to assume some kind of separation of present from past behaviour. The analysis indicates that such an assumption is defensible. An experimental defence of a procedure used widely in non-experimental empirical economics research is provided.
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Volume (Year): 37 (2005)
Issue (Month): 1 ()
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- Karni, Edi & Safra, Zvi, 1987. ""Preference Reversal' and the Observability of Preferences by Experimental Methods," Econometrica, Econometric Society, vol. 55(3), pages 675-85, May.
- Robin Cubitt & Chris Starmer & Robert Sugden, 1998. "On the Validity of the Random Lottery Incentive System," Experimental Economics, Springer;Economic Science Association, vol. 1(2), pages 115-131, September.
- Harless, David W & Camerer, Colin F, 1994. "The Predictive Utility of Generalized Expected Utility Theories," Econometrica, Econometric Society, vol. 62(6), pages 1251-89, November.
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