Experimental Economics: Rethinking the Rules

By Nicholas Bardsley; Robin Cubitt et al. | Go to book overview

6
Incentives in Experiments

6.1 Preliminaries

Monetary incentives lie at the heart of controversies in experimental economics and, even more markedly, between it and other disciplines such as psychology. The latter point is graphically illustrated by the practices of the different disciplines. Surveys by Colin Camerer and Robert Hogarth (1999) and Ralph Hertwig and Andreas Ortmann (2001, 2003) indicate that, while the vast majority of experiments appearing in the economics literature use task-related incentives (a concept that we define below), the majority of those appearing in the psychology literature do not. The statistical evidence is quite striking: every experimental study published in the American Economic Review between 1970 and 1997 used task-related incentives (Camerer and Hogarth 1999), while only 26% of papers published in the Journal of Behavioral Decision Making—a leading outlet for experimental psychologists—between 1988 and 1997 did so (Hertwig and Ortmann 2001). The differences are not only between economists and psychologists. Even among economists there are important differences of opinion about the required levels and role of incentives, as illustrated by our discussion of choice experiments in chapter 2.

In this chapter, we extend our analysis of incentives by considering in more detail the effects they may have and why they are an important experimental design issue, in order to provide a framework for adjudicating between conflicting views on their role, level, and structure. These are the main objectives of this chapter, but before pursuing them directly we consider how conventions regarding the use of incentives have developed. In our view, such conventions should not be followed unquestioningly. It remains important to ask: What are incentives in an experiment for? Are they always beneficial or could they be detrimental to the investigation? Are they useful in some settings and unnecessary in others? And, if so, what separates the two?

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Experimental Economics: Rethinking the Rules
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Preface vii
  • 1: Introduction 7
  • 2: Theory Testing and the Domain of Economic Theory 46
  • 3: Experimental Testing in Practice 95
  • 4: Experiments and Inductive Generalization 141
  • 5: External Validity 196
  • 6: Incentives in Experiments 244
  • 7: Noise and Variability in Experimental Data 286
  • 8: Conclusion 331
  • References 347
  • Index 369
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