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Experimental elicitation of ambiguity attitude using the random incentive system

Aurelien Baillon (), Yoram Halevy () and Chen Li

Working Papers from University of Toronto, Department of Economics

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; certainty equivalent; probability equivalents; broad bracketing; Ellsberg; BDM; choice list; MPL (search for similar items in EconPapers)
JEL-codes: C81 C91 D81 (search for similar items in EconPapers)
Pages: Unknown pages
Date: 2021-11-14
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
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Related works:
Journal Article: Experimental elicitation of ambiguity attitude using the random incentive system (2022) Downloads
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 (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:tor:tecipa:tecipa-711

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