Randomization Devices and the Elicitation of Ambiguity-Averse Preferences

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Abstract

In random incentive mechanisms agents choose from multiple problems and a randomization device selects a single problem to determine payment. Agents are assumed to act as if they faced each problem on its own. While this approach is valid when agents are expected utility maximizers, ambiguity-averse agents may use the randomization device to hedge and thereby contaminate the data.
Original languageEnglish
Pages (from-to)221–235
Number of pages15
JournalJournal of Economic Theory
Volume159
Issue numberPart A
Early online date4 Jun 2015
DOIs
Publication statusPublished - 1 Sep 2015

Keywords

  • Random Incentive Mechanisms
  • Ambiguity Aversion
  • Experiments
  • Hedging

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