Prince: An Improved Method For Measuring Incentivized Preferences

Cathleen Johnson, Aurélien Baillon (), Han Bleichrodt, Zhihua Li, Dennie van Dolder and Peter Wakker
Additional contact information
Cathleen Johnson: West Virginia University [Morgantown]
Aurélien Baillon: Erasmus University Rotterdam (The Netherlands, Rotterdam) - EUR
Han Bleichrodt: Erasmus University Rotterdam (The Netherlands, Rotterdam) - EUR
Zhihua Li: Aston University [Birmingham]

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Abstract: "This paper introduces the Prince incentive system for measuring preferences. Prince combines the tractability of direct matching, allowing for the precise and direct elicitation of indifference values, with the clarity and validity of choice lists. It makes incentive compatibility completely transparent to subjects, avoiding the opaqueness of the Becker-DeGroot-Marschak mechanism. It can be used for adaptive experiments while avoiding any possibility of strategic behavior by subjects. To illustrate Prince's wide applicability, we investigate preference reversals, the discrepancy between willingness to pay and willingness to accept, and the major components of decision making under uncertainty: utilities, subjective beliefs, and ambiguity attitudes. Prince allows for measuring utility under risk and ambiguity in a tractable and incentive-compatible manner even if expected utility is violated. Our empirical findings support modern behavioral views, e.g., confirming the endowment effect and showing that utility is closer to linear than classically thought. In a comparative study, Prince gives better results than a classical implementation of the random incentive system."

Keywords: Matching; Incentive compatibility; Random incentive system; BDM; Choice list (search for similar items in EconPapers)
Date: 2021-02-01
Note: View the original document on HAL open archive server: https://hal.science/hal-05677544v1
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Citations: View citations in EconPapers (1)

Published in Journal of Risk and Uncertainty, 2021, 62 (1), pp.1 - 28. ⟨10.1007/s11166-021-09346-9⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05677544

DOI: 10.1007/s11166-021-09346-9

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