Incentive

Engineering

Compatibility (geochemistry)

Microeconomics

Certainty

Ambiguity

Economics

Computer science

Chemical engineering

Management science

Operations research

Incentive compatibility

Mathematics

Decision maker

Econometrics

Geometry

Mathematical economics

Programming language

Ambiguity aversion

Experimental Economics

We demonstrate how the standard usage of the random incentive system in ambiguity experiments eliciting certainty and probability equivalents might not be incentive compatible if the decision-maker is ambiguity averse. We propose a slight modification of the procedure in which the randomization takes place before decisions are made and the state is realized, and prove that if subjects evaluate the experimental environment in that way (first-risk, second-uncertainty), incentive compatibility may be restored.

Experimental elicitation of ambiguity attitude using the random incentive system