Prince: An Improved Method for Measuring Incentivized Preferences

Journal of Risk and Uncertainty, Vol. 62, No. 1, pp. 1-28, February 2021

150 Pages Posted: 4 Oct 2014 Last revised: 26 Aug 2022

See all articles by Cathleen A. Johnson

Cathleen A. Johnson

Center for Interuniversity Research and Analysis on Organization (CIRANO); University of Arizona, Philosophy, Politics, Economics and Law Program

Aurelien Baillon

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Han Bleichrodt

Erasmus University Rotterdam (EUR) - Institute of Health Policy and Management

Zhihua Li

University of Birmingham

Dennie van Dolder

University of Essex - Department of Economics

Peter P. Wakker

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Date Written: February 1, 2021

Abstract

This paper introduces the Prince incentive system for measuring preferences. Prince is a variation of the random incentive system that enhances isolation and makes incentive compatibility more transparent to subjects. It allows for the precise and direct elicitation of indifference values as with matching while having the clarity and validity of choice lists. Prince avoids the opaqueness of Becker-DeGroot-Marschak’s mechanism and precludes strategic behavior in adaptive experiments. Using Prince, we shed new light on willingness to accept and the major components of decision under uncertainty: utilities, subjective beliefs, and ambiguity attitudes. Prince outperforms a classical implementation of the random incentive system.

Keywords: incentive compatibility, random incentive system, BDM, choice list, matching

JEL Classification: C91, D81

Suggested Citation

Johnson, Cathleen Amanda and Johnson, Cathleen Amanda and Baillon, Aurelien and Bleichrodt, Han and Li, Zhihua and van Dolder, Dennie and Wakker, Peter P., Prince: An Improved Method for Measuring Incentivized Preferences (February 1, 2021). Journal of Risk and Uncertainty, Vol. 62, No. 1, pp. 1-28, February 2021, Available at SSRN: https://ssrn.com/abstract=2504745 or http://dx.doi.org/10.2139/ssrn.2504745

Cathleen Amanda Johnson

Center for Interuniversity Research and Analysis on Organization (CIRANO)

Montreal, Quebec H3C 3J7
Canada

University of Arizona, Philosophy, Politics, Economics and Law Program ( email )

Social and Behavioral Sciences
Tucson, AZ 85721-0108
United States

Aurelien Baillon

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Han Bleichrodt

Erasmus University Rotterdam (EUR) - Institute of Health Policy and Management ( email )

Netherlands

Zhihua Li

University of Birmingham ( email )

Edgbaston, Birmingham B15 2TT
United Kingdom

Dennie Van Dolder

University of Essex - Department of Economics ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

Peter P. Wakker (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

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