Random Incentive Systems in a Dynamic Choice Experiment

G. Baltussen, G.T. Post, M.J. van den Assem, P.P. Wakker

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Experiments frequently use a random incentive system (RIS), where only tasks that are randomly selected at the end of the experiment are for real. The most common type pays every subject one out of her multiple tasks (within-subjects randomization). Recently, another type has become popular, where a subset of subjects is randomly selected, and only these subjects receive one real payment (between-subjects randomization). In earlier tests with simple, static tasks, RISs performed well. The present study investigates RISs in a more complex, dynamic choice experiment. We find that between-subjects randomization reduces risk aversion. While within-subjects randomization delivers unbiased measurements of risk aversion, it does not eliminate carry-over effects from previous tasks. Both types generate an increase in subjects' error rates. These results suggest that caution is warranted when applying RISs to more complex and dynamic tasks.
LanguageEnglish
Pages418-443
JournalExperimental Economics
Volume15
Issue number3
DOIs
StatePublished - 2012

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Randomization
Incentive systems
Dynamic choice
Choice experiment
Experiment
Risk aversion
Complex dynamics
Payment
Multiple tasks

Cite this

Baltussen, G. ; Post, G.T. ; van den Assem, M.J. ; Wakker, P.P./ Random Incentive Systems in a Dynamic Choice Experiment. In: Experimental Economics. 2012 ; Vol. 15, No. 3. pp. 418-443
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Baltussen, G, Post, GT, van den Assem, MJ & Wakker, PP 2012, 'Random Incentive Systems in a Dynamic Choice Experiment' Experimental Economics, vol. 15, no. 3, pp. 418-443. DOI: 10.1007/s10683-011-9306-4

Random Incentive Systems in a Dynamic Choice Experiment. / Baltussen, G.; Post, G.T.; van den Assem, M.J.; Wakker, P.P.

In: Experimental Economics, Vol. 15, No. 3, 2012, p. 418-443.

Research output: Contribution to JournalArticleAcademicpeer-review

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