Prince: An Improved Method for Measuring Incentivized Preferences

40 Pages Posted: 4 Oct 2014 Last revised: 9 Feb 2019

See all articles by Cathleen A. Johnson

Cathleen A. Johnson

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

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 Warwick - Warwick Business School

Dennie van Dolder

VU Amsterdam - School of Business and Economics; Centre for Decision Research and Experimental Economics (CeDEx) - University of Nottingham

Peter P. Wakker

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

Date Written: February 2019

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 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 2019). Available at SSRN: https://ssrn.com/abstract=2504745 or http://dx.doi.org/10.2139/ssrn.2504745

Cathleen Amanda Johnson

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

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

Center for Interuniversity Research and Analysis on Organization (CIRANO)

Montreal, Quebec H3C 3J7
Canada

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 Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

Dennie Van Dolder

VU Amsterdam - School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Centre for Decision Research and Experimental Economics (CeDEx) - University of Nottingham ( email )

University Park
Nottingham, NG7 2RD
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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