Choice Under Uncertainty: Empirical Methods and Experimental Results
843
random number was the “buying price” for the bet. If the buying price was higher than
the reservation price that the subject stated, she was paid the buying price (and her pay-
off did not depend on the outcome of her bet). However, if the buying price was lower
than the minimal selling price, the actual payment depended on the outcome of her bet.
This BDM technique is well-known in the literature, but is complicated to describe and
difficult for subjects to understand. Moreover there are well-known problems, see Karni
and Safra (1987), with using this technique when prefer ...
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month, and much more.