Experimental elicitation of ambiguity attitude using the random incentive system

Aurélien Baillon (), Yoram Halevy and Chen Li ()
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Aurélien Baillon: Erasmus University Rotterdam
Chen Li: Erasmus University Rotterdam

Experimental Economics, 2022, vol. 25, issue 3, No 9, 1002-1023

Abstract: 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.

Keywords: Incentive compatibility; Integration vs Isolation; Ambiguity aversion; Non-expected utility; Reduction of compound lotteries; C91; D81 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (13)

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Related works:
Working Paper: Experimental elicitation of ambiguity attitude using the random incentive system (2022)
Working Paper: Experimental elicitation of ambiguity attitude using the random incentive system (2021)
Working Paper: Experimental Elicitation of Ambiguity Attitude using the Random Incentive System (2015)
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DOI: 10.1007/s10683-021-09739-2

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