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Separated decisions

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  • Brown, Alexander L.
  • Healy, Paul J.

Abstract

We use experiments to test the incentive compatibility of the “random problem selection” payment mechanism, in which only one choice out of many is randomly chosen for payment. We find that the mechanism is not incentive compatible when all decisions are shown together in a single list. But when the rows of the list are randomized and shown on separate screens, incentive compatibility is restored. This causes more apparent intransitivities in choice (“multiple switching”), but, since the experiment is incentive compatible, these intransitivities must be inherent in subjects’ preferences.

Suggested Citation

  • Brown, Alexander L. & Healy, Paul J., 2018. "Separated decisions," European Economic Review, Elsevier, vol. 101(C), pages 20-34.
    • Handle: RePEc:eee:eecrev:v:101:y:2018:i:c:p:20-34
    DOI: 10.1016/j.euroecorev.2017.09.014
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    4. Rosato, Antonio & Tymula, Agnieszka A., 2024. "A novel experimental test of truthful bidding in second-price auctions with real objects," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 111(C).
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    7. Gamba, Astrid & Regner, Tobias, 2019. "Preferences-dependent learning in the centipede game: The persistence of mistrust," European Economic Review, Elsevier, vol. 120(C).
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    9. Xie, Lusi & Adamowicz, Wiktor & Kecinski, Maik & Fooks, Jacob R., 2022. "Using economic experiments to assess the validity of stated preference contingent behavior responses," Journal of Environmental Economics and Management, Elsevier, vol. 114(C).

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    More about this item

    Keywords

    Payment mechanism; Experimental methodology; Monotonicity; Decisions under uncertainty;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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