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Asymmetrically Dominated Choice Problems and Random Incentive Mechanisms

Author

Listed:
  • James C. Cox
  • Vjollca Sadiraj
  • Ulrich Schmidt

Abstract

A 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.

Suggested Citation

  • James C. Cox & Vjollca Sadiraj & Ulrich Schmidt, 2012. "Asymmetrically Dominated Choice Problems and Random Incentive Mechanisms," Experimental Economics Center Working Paper Series 2012-10, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University, revised Mar 2014.
  • Handle: RePEc:exc:wpaper:2012-10
    as

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    File URL: http://excen.gsu.edu/workingpapers/GSU_EXCEN_WP_2012-10.pdf
    File Function: First version, 2012
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    File URL: http://excen.gsu.edu/workingpapers/GSU_EXCEN_WP_2014-02.pdf
    File Function: Revised version, 2014
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    References listed on IDEAS

    as
    1. Huber, Joel & Payne, John W & Puto, Christopher, 1982. " Adding Asymmetrically Dominated Alternatives: Violations of Regularity and the Similarity Hypothesis," Journal of Consumer Research, Oxford University Press, vol. 9(1), pages 90-98, June.
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    Cited by:

    1. Noemí Herranz-Zarzoso & Gerardo Sabater-Grande, 2018. "Framing and repetition effects on risky choices: A behavioral approach," Working Papers 2018/04, Economics Department, Universitat Jaume I, Castellón (Spain).
    2. repec:ucp:jpolec:doi:10.1086/698136 is not listed on IDEAS
    3. James C. Cox & Eike B. Kroll & Marcel Lichters & Vjollca Sadiraj & Bodo Vogt, 2018. "The St. Petersburg Paradox Despite Risk-seeking Preferences: An Experimental Study," Experimental Economics Center Working Paper Series 2018-02, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
    4. Yaron Azrieli & Christopher P. Chambers & Paul J. Healy, 2018. "Incentives in Experiments: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 126(4), pages 1472-1503.

    More about this item

    Keywords

    random incentive mechanism; isolation; asymmetrically dominated alternatives;

    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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