How to Deal with Inconsistent Choices on Multiple Price Lists

Christoph Engel and Oliver Kirchkamp

Economic experiments are often based on the claim that some heterogeneous behavioral trait affects response to treatment. This trait is measured in another part of the experiment, using a multiple price list. Frequently, choices on such a list are not perfectly consistent.

In this paper we argue that this inconsistency is a resource. It informs the researcher about the precision with which the trait is measured. Precision can be estimated with a measurement error model.

With data from an experiment that studies the relation between risk aversion and punishment we illustrate the approach, and show that it matters.

Keywords: Measurement error, risk, lab experiment, public good, Bayesian inference.

JEL: C91, D43, L41

• Here is the most recent version of the working paper as of 18 January 2019.
• An earlier version of the paper was circulated with the title Measurement errors of risk aversion and how to correct them.
• Data and R files
• On 21 February 2019, the paper has been accepted for publication at the Journal of Economic Behaviour & Organization..

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