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Randomization devices and the elicitation of ambiguity-averse preferences

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  • Bade, Sophie

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.

Suggested Citation

  • Bade, Sophie, 2015. "Randomization devices and the elicitation of ambiguity-averse preferences," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 221-235.
    • Handle: RePEc:eee:jetheo:v:159:y:2015:i:pa:p:221-235
    DOI: 10.1016/j.jet.2015.05.017
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    References listed on IDEAS

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    More about this item

    Keywords

    Random incentive mechanisms; Ambiguity aversion; Experiments; Hedging;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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