scholarly journals Prince: An improved method for measuring incentivized preferences

2021 ◽  
Author(s):  
Cathleen Johnson ◽  
Aurélien Baillon ◽  
Han Bleichrodt ◽  
Zhihua Li ◽  
Dennie van Dolder ◽  
...  
Keyword(s):  
Strategic Behavior ◽  
Incentive Compatibility ◽  
Endowment Effect ◽  
Willingness To Accept ◽  
Incentive System ◽  
Preference Reversals ◽  
Improved Method ◽  
Subjective Beliefs ◽  
Incentive Compatible ◽  
Ambiguity Attitudes

AbstractThis paper introduces the Prince incentive system for measuring preferences. Prince combines the tractability of direct matching, allowing for the precise and direct elicitation of indifference values, with the clarity and validity of choice lists. It makes incentive compatibility completely transparent to subjects, avoiding the opaqueness of the Becker-DeGroot-Marschak mechanism. It can be used for adaptive experiments while avoiding any possibility of strategic behavior by subjects. To illustrate Prince’s wide applicability, we investigate preference reversals, the discrepancy between willingness to pay and willingness to accept, and the major components of decision making under uncertainty: utilities, subjective beliefs, and ambiguity attitudes. Prince allows for measuring utility under risk and ambiguity in a tractable and incentive-compatible manner even if expected utility is violated. Our empirical findings support modern behavioral views, e.g., confirming the endowment effect and showing that utility is closer to linear than classically thought. In a comparative study, Prince gives better results than a classical implementation of the random incentive system.

scholarly journals The Willingness to Pay–Willingness to Accept Gap, the “Endowment Effect,” Subject Misconceptions, and Experimental Procedures for Eliciting Valuations

2005 ◽  
Vol 95 (3) ◽  
pp. 530-545 ◽  
Author(s):  
Charles R Plott ◽  
Kathryn Zeiler
Keyword(s):  
Experimental Design ◽  
Willingness To Pay ◽  
Loss Aversion ◽  
Endowment Effect ◽  
Willingness To Accept ◽  
Incentive Compatible ◽  
Fundamental Properties ◽  
Extensive Training ◽  
Different Types ◽  
And Training

We conduct experiments to explore the possibility that subject misconceptions, as opposed to a particular theory of preferences referred to as the “endowment effect,” account for reported gaps between willingness to pay (“WTP”) and willingness to accept (“WTA”). The literature reveals two important facts. First, there is no consensus regarding the nature or robustness of WTP-WTA gaps. Second, while experimenters are careful to control for subject misconceptions, there is no consensus about the fundamental properties of misconceptions or how to avoid them. Instead, by implementing different types of experimental controls, experimenters have revealed notions of how misconceptions arise. Experimenters have applied these controls separately or in different combinations. Such controls include ensuring subject anonymity, using incentive-compatible elicitation mechanisms, and providing subjects with practice and training on the elicitation mechanism before employing it to measure valuations. The pattern of results reported in the literature suggests that the widely differing reports of WTP-WTA gaps could be due to an incomplete science regarding subject misconceptions. We implement a “revealed theory” methodology to compensate for the lack of a theory of misconceptions. Theories implicit in experimental procedures found in the literature are at the heart of our experimental design. Thus, our approach to addressing subject misconceptions reflects an attempt to control simultaneously for all dimensions of concern over possible subject misconceptions found in the literature. To this end, our procedures modify the Becker-DeGroot-Marschak mechanism used in previous studies to elicit values. In addition, our procedures supplement commonly used procedures by providing extensive training on the elicitation mechanism before subjects provide WTP and WTA responses. Experiments were conducted using both lotteries and mugs, goods frequently used in endowment effect experiments. Using the modified procedures, we observe no gap between WTA and WTP. Therefore, our results call into question the interpretation of observed gaps as evidence of loss aversion or prospect theory. Further evidence is required before convincing interpretations of observed gaps can be advanced.

scholarly journals Testing the Endowment Effect for Default Rules

2017 ◽  
Vol 13 (2) ◽  
Author(s):  
Isabel Marcin ◽  
Andreas Nicklisch
Keyword(s):  
Laboratory Experiments ◽  
Endowment Effect ◽  
Willingness To Accept ◽  
Pay Gap ◽  
Incentive Compatible ◽  
Value Elicitation ◽  
In Series ◽  
Expected Values ◽  
The Right ◽  
Default Rules

AbstractThis paper explores potential endowment effects of contractual default rules. For this purpose, we analyze the Hadley liability default clause in a model of bilateral bargaining of lotteries against safe options. The liability default clause determines the right for the safe payoff option. We test the model in series of laboratory experiments. The results reveal a substantial willingness-to-accept to willingness-to-pay gap for the right to change lotteries against safe options. Even if we apply the incentive compatible Becker-DeGroot-Marschak value elicitation mechanism, there is a significant gap indicating a robust endowment effect caused by default rules. Differences of expected values of the lotteries and the safe options consistently decrease the gaps. Implications for applications of default rules in the law are discussed.

scholarly journals Rationality in games and institutions

Synthese ◽  
2021 ◽  
Author(s):  
Philippe van Basshuysen
Keyword(s):  
Institutional Design ◽  
Incentive Compatibility ◽  
Social Goals ◽  
General Constraint ◽  
Rational Agents ◽  
Economic Agents ◽  
Incentive Compatible ◽  
Inclusive Concept ◽  
The One ◽  
Orthodox View

AbstractAgainst the orthodox view of the Nash equilibrium as “the embodiment of the idea that economic agents are rational” (Aumann, 1985, p 43), some theorists have proposed ‘non-classical’ concepts of rationality in games, arguing that rational agents should be capable of improving upon inefficient equilibrium outcomes. This paper considers some implications of these proposals for economic theory, by focusing on institutional design. I argue that revisionist concepts of rationality conflict with the constraint that institutions should be designed to be incentive-compatible, that is, that they should implement social goals in equilibrium. To resolve this conflict, proponents of revisionist concepts face a choice between three options: (1) reject incentive compatibility as a general constraint, (2) deny that individuals interacting through the designed institutions are rational, or (3) accept that their concepts do not cover institutional design. I critically discuss these options and I argue that a more inclusive concept of rationality, e.g. the one provided by Robert Sugden’s version of team reasoning, holds the most promise for the non-classical project, yielding a novel argument for incentive compatibility as a general constraint.

scholarly journals The Willingness to Pay—Willingness to Accept Gap, the “Endowment Effect,” Subject Misconceptions, and Experimental Procedures for Eliciting Valuations: Reply

2011 ◽  
Vol 101 (2) ◽  
pp. 1012-1028 ◽  
Author(s):  
Charles R Plott ◽  
Kathryn Zeiler
Keyword(s):  
Willingness To Pay ◽  
Endowment Effect ◽  
Willingness To Accept ◽  
Data Description ◽  
Effect Theory

Isoni, Loomes, and Sugden (2011) assert that Plott and Zeiler (2005) reported inaccurate results. Placing ILS's selective quotes into context demonstrates otherwise. Additionally, examining the data closely yields three conclusions. First, all mug data reject endowment effect theory. Second, lottery gaps are associated with unstable attitudes toward uncertainty, a finding consistent with PZ's (2005) lottery data description, explicit warnings about procedure limitations and the data supplement, which reports the lottery data and cautions. Third, lottery outcome beliefs are influenced by whether WTP or WTA is reported, suggesting that changing beliefs, as opposed to the shape of preferences, produce lottery gaps. (JEL C91)

Analysis of Power Transaction Space Model between Power Users and Generators Based on Incentive Compatibility Theory

2015 ◽  
Vol 1092-1093 ◽  
pp. 414-417
Author(s):  
Chun Cheng Gao ◽  
Li Tao ◽  
Shu Hong Shi ◽  
Dun Nan Liu
Keyword(s):  
Power Generation ◽  
Incentive Compatibility ◽  
Power Generators ◽  
Space Model ◽  
Incentive Compatible ◽  
Direct Trade ◽  
Compatibility Theory

There are various difficulties between power generators and power users during direct trade. The current direct trade rules and patterns cannot guarantee the interests of all parties directly related to the transaction, which is one of important reasons. Direct transaction space model of incentive compatible principles is proposed in this paper. How to guarantee the interests of grid, generators and big users during direct transaction is analyzed. For power generation companies, large users and grids, the change of interests are analyzed and marginal decision condition is studied. Based on the principle of incentive compatibility, direct transaction space model which not damage the interests of three transaction bodies is analyzed.

The Sample Complexity of Up-to-ε Multi-dimensional Revenue Maximization

2021 ◽  
Vol 68 (3) ◽  
pp. 1-28
Author(s):  
Yannai A. Gonczarowski ◽  
S. Matthew Weinberg
Keyword(s):  
Computational Efficiency ◽  
State Of The Art ◽  
Incentive Compatibility ◽  
Single Parameter ◽  
Revenue Maximization ◽  
Sample Complexity ◽  
Nonparametric Approach ◽  
Incentive Compatible ◽  
The Standard Model ◽  
Parameter Case

We consider the sample complexity of revenue maximization for multiple bidders in unrestricted multi-dimensional settings. Specifically, we study the standard model of additive bidders whose values for heterogeneous items are drawn independently. For any such instance and any , we show that it is possible to learn an -Bayesian Incentive Compatible auction whose expected revenue is within of the optimal -BIC auction from only polynomially many samples. Our fully nonparametric approach is based on ideas that hold quite generally and completely sidestep the difficulty of characterizing optimal (or near-optimal) auctions for these settings. Therefore, our results easily extend to general multi-dimensional settings, including valuations that are not necessarily even subadditive , and arbitrary allocation constraints. For the cases of a single bidder and many goods, or a single parameter (good) and many bidders, our analysis yields exact incentive compatibility (and for the latter also computational efficiency). Although the single-parameter case is already well understood, our corollary for this case extends slightly the state of the art.

An Incentive Compatible Mechanism for Replica Placement in Peer-Assisted Content Distribution

2020 ◽  
Vol 12 (1) ◽  
pp. 47-67 ◽  
Author(s):  
Prabir Bhattacharya ◽  
Minzhe Guo
Keyword(s):  
Design Theory ◽  
Large Scale ◽  
State Of The Art ◽  
Incentive Compatibility ◽  
Content Delivery ◽  
Replica Placement ◽  
Key Technology ◽  
Incentive Compatible ◽  
Content Delivery Networks ◽  
Delivery Networks

Content delivery is a key technology on the Internet to achieve large scale, low-latency, reliable, and intelligent data delivery. Replica placement (RP) is a key machinery in content delivery systems to achieve efficient and effective content delivery. This work proposes a novel decentralized algorithm for the replica placement in peer-assisted content delivery networks with simultaneous considerations for peer incentives. By applying techniques from the algorithmic mechanism design theory, the authors show the incentive compatibility of the proposed algorithm. Experiments were conducted to validate the properties of the proposed method and comparisons were made with the state-of-the-art RP algorithms.

scholarly journals Ex-post IR Dynamic Auctions with Cost-per-Action Payments

2018 ◽  
Author(s):  
Weiran Shen ◽  
Zihe Wang ◽  
Song Zuo
Keyword(s):  
Common Knowledge ◽  
Incentive Compatibility ◽  
Individual Rationality ◽  
Incentive Compatible ◽  
Dynamic Auctions ◽  
Ex Post ◽  
Ex Ante ◽  
Ad Auctions ◽  
The Cost ◽  
General Reduction

Motivated by online ad auctions, we consider a repeated auction between one seller and many buyers, where each buyer only has an estimation of her value in each period until she actually receives the item in that period. The seller is allowed to conduct a dynamic auction but must guarantee ex-post individual rationality. In this paper, we use a structure that we call credit accounts to enable a general reduction from any incentive compatible and ex-ante individual rational dynamic auction to an approximate incentive compatible and ex-post individually rational dynamic auction with credit accounts. Our reduction obtains stronger individual rationality guarantees at the cost of weaker incentive compatibility. Surprisingly, our reduction works without any common knowledge assumption. Finally, as a complement to our reduction, we prove that there is no non-trivial auction that is exactly incentive compatible and ex-post individually rational under this setting.

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