Asymmetrically dominated alternatives and random incentive mechanisms

by Ulrich Schmidt

This note presents an experimental study of the random lottery incentive mechanism. In the baseline treatment 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 risk behavior can be manipulated systematically. This implies that the isolation hypothesis is violated the random incentive mechanism does not elicit true preferences. -- Random incentive mechanism ; isolation ; asymmetrically dominated alternatives

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Year of publication:	2010
Authors:	Schmidt, Ulrich
Publisher:	Kiel : Kiel Inst. for the World Economy
Subject:	-10 : l1k \| Leistungsanreiz \| Performance incentive \| Zufallsvariable \| Random variable \| Risikopräferenz \| Risk attitude \| Experiment