Working Paper

Alternative Payoff Mechanisms for Choice under Risk

Kiel Working Papers, 1932

Most experiments on decision theory ask individual subjects to make more than one decision. The isolation hypothesis is commonly used to justify the choice of the random lottery incentive mechanism as the preferred payoff protocol. This research note reports on the main findings on the theoretical and empirical performance of different payoff mechanisms on eliciting individuals’ attitudes toward risk. It challenges the conventional view that the random lottery incentive mechanism introduces no biases in inducing risk preferences.

Autoren

James C. Cox
Vjollca Sadiraj

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