Validated RIS: A within subject test of incentive compatibility in the random (lottery) incentive scheme

Evan Calford and Anujit Chakraborty

ANU Working Papers in Economics and Econometrics from Australian National University, College of Business and Economics, School of Economics

Abstract: We propose the Validated Random Incentive Scheme (VRIS)—an enhancement of the standard Random Incentive Scheme (RIS)—that enables internal validation of RIS’s incentive compatibility (IC) without altering an experiment’s core design. The key innovation is that researchers can observe each subject under both RIS and single-choice incentives, enabling direct withinperson comparisons that form the basis for testing IC. We derive a set of testable predictions from assumptions about the structure of random noise in decision making. In an online experiment involving three risky decisions and a perception task, we use the VRIS design to compare behavior under the RIS with that under single-choice incentives. We find that the RIS distorts the marginal distribution of choices in two of the four decisions and the joint distributions in five of six decision-pairs. In contrast, our novel VRIS directly measures all four marginal distributions under single-choice incentives and enables recovery of undistorted pairwise distributions in all but one case.

Keywords: Experimental Economics; Random Incentive Scheme; Incentive Compatibility; Stochastic Choice (search for similar items in EconPapers)
JEL-codes: C90 D81 D90 (search for similar items in EconPapers)
Date: 2025-10
New Economics Papers: this item is included in nep-exp and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:acb:cbeeco:2025-705

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