Incentives in experiments with objective lotteries

• Published in: Experimental economics : a journal of the Economic Science Association Vol. 23; no. 1; pp. 1 - 29
• Main Authors: Azrieli, Yaron, Chambers, Christopher P., Healy, Paul J.
• Format: Journal Article
• Language: English
• Published: New York Springer US 01.03.2020; Springer Nature B.V
• Subjects: Behavioral/Experimental Economics; Compatibility; Decision theory; Dominance; Economic theory; Economic Theory/Quantitative Economics/Mathematical Methods; Economics; Economics and Finance; Game Theory; Incentives; Lotteries; Microeconomics; Operations Research/Decision Theory; Original Paper; Social and Behav. Sciences; D84; C90; D81; Experimental design; Decision theory; Mechanism design
• ISSN: 1386-4157; 1573-6938
• DOI: 10.1007/s10683-019-09607-0

Azrieli et al. (J Polit Econ, 2018 ) provide a characterization of incentive compatible payment mechanisms for experiments, assuming subjects’ preferences respect dominance but can have any possible subjective beliefs over random outcomes. If instead we assume subjects view probabilities as objective—for example, when dice or coins are used—then the set of incentive compatible mechanisms may grow. In this paper we show that it does, but the added mechanisms are not widely applicable. As in the subjective-beliefs framework, the only broadly-applicable incentive compatible mechanism (assuming all preferences that respect dominance are admissible) is to pay subjects for one randomly-selected decision.