Lottery choice: incentives, complexity and decision time
This paper reports the results of an experiment on lottery choice in which decision cost is measured as decision making time. A simple decision cost model motivates this measurement and the experiment, and predicts relationships between incentive mechanism manipulations and decision making time which are borne out in the experiment. The decision cost model also suggests that decisions will change in the face of the incentive manipulations in the experiment. This suggestion is borne out in a complex decision-making environment, but not in a simple one. Specification tests demonstrate that observed changes in subjects' behavior are not merely due to changes in subject-specific error variance. One may conclude from this that the 'payoff dominance'problem is a real issue in complex decision making experiments. Copyright 1993 by Royal Economic Society.