The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework

Camerer, Colin F.; Hogarth, Robin M.

doi:10.1007/978-94-017-1406-8_2

Cited by 1,055 publications

(1,061 citation statements)

References 87 publications

(24 reference statements)

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“…This conclusion is similar to that reached by Camerer and Hogarth (1999) after an extensive review of the literature on financial incentives in experimental economics more generally. They concluded that methods involving hypothetical choices and those involving real consequences typically yield qualitatively similar results.…”

Section: Are These Procedures Realistic?supporting

confidence: 88%

A Discounting Framework for Choice With Delayed and Probabilistic Rewards.

Green¹,

Myerson²

2004

Psychological Bulletin

1,398

1,323

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When choosing between delayed or uncertain outcomes, individuals discount the value of such outcomes on the basis of the expected time to or the likelihood of their occurrence. In an integrative review of the expanding experimental literature on discounting, the authors show that although the same form of hyperbola-like function describes discounting of both delayed and probabilistic outcomes, a variety of recent findings are inconsistent with a single-process account. The authors also review studies that compare discounting in different populations and discuss the theoretical and practical implications of the findings. The present effort illustrates the value of studying choice involving both delayed and probabilistic outcomes within a general discounting framework that uses similar experimental procedures and a common analytical approach.Choice is relatively predictable when the alternatives differ on only one dimension. For example, if individuals are offered a choice between two rewards that differ only in amount, they generally choose the larger rather than the smaller reward. Similarly, if offered a choice between two rewards that differ only in delay, individuals tend to choose the reward available sooner rather than the one available later, and if offered a choice between two alternatives that differ only in probability, they tend to choose the more certain reward. These same general principles, and a complementary set of principles for negative outcomes (e.g., smaller punishments will be chosen over larger ones), apply both to humans and other animals. These behavioral tendencies obviously make both economic and evolutionary sense.Problems arise, however, when choice options differ on more than one dimension-for example, when an individual must choose between a smaller reward available sooner and a larger reward available later. It is also unclear, in general, which alternative an individual would (or should) select when choosing between a smaller, more certain reward and a larger, less certain one or between a less certain reward available sooner and a more certain, but more delayed, reward. These problems are only compounded when rewards differ on all three dimensions (i.e., amount, delay, and probability). The central issue is how individuals make trade-offs among their preferences on these dimensions (Keeney & Raiffa, 1993).This issue is not only of theoretical interest; it also has implications for everyday decision making, which often involves outcomes that differ on multiple dimensions. Examples of such decisions include deciding whether to purchase a less expensive item that can be enjoyed now or to save for a more expensive one; whether to choose a risky investment that potentially could pay off at a high rate or one that pays a low but guaranteed rate of return; and whether to buy

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Section: Are These Procedures Realistic?supporting

confidence: 88%

A Discounting Framework for Choice With Delayed and Probabilistic Rewards.

Green¹,

Myerson²

2004

Psychological Bulletin

1,398

1,323

View full text Add to dashboard Cite

show abstract

“…readily satiated‖ (Smith, 1976, p. 277). Incentives reduce the variance in participants' behavior and generally improve decision making, bringing decisions closer to predictions of rational choice theory and game theory (Camerer & Hogarth, 1999;Smith & Walker, 1993), especially in tasks of intermediate difficulty (Hertwig & Ortmann, 2001).…”

Section: Rationale For Current Researchmentioning

confidence: 96%

Learning to cooperate without awareness in multiplayer minimal social situations

Colman¹,

Pulford²,

Omtzigt³

et al. 2010

Cognitive Psychology

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Experimental and Monte Carlo methods were used to test theoretical predictions about adaptive learning of cooperative responses without awareness in minimal social situations-games in which the payoffs to players depend not on their own actions but exclusively on the actions of other group members. In Experiment 1, learning occurred slowly over 200 rounds in a dyadic minimal social situation but not in multiplayer groups. In Experiments 2, 3, and 4, learning occurred rarely in multiplayer groups, even when players were informed that they were interacting strategically and were allowed to communicate with one another but were not aware of the game's payoff structure. Monte Carlo simulation suggested that players approach minimal social situations using a noisy version of the win-stay, lose-shift decision rule, deviating from the deterministic rule less frequently after rewarding than unrewarding rounds.

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“…individual motivations not restricted to one's own well-being but including the well-being of others (Camerer and Fehr, 2004). Marginal totals are well-documented for various populations (Camerer, 2003;Cardenas and Carpenter, 2008;Henrich et al, 2010) and stake levels (Camerer and Hogarth, 1999;Carpenter et al, 2005). Each protocol is easily understandable by participants of different social backgrounds and training.…”

Section: Experimental Gamesmentioning

confidence: 99%

“…Experimentalists typically assume that participants will more likely adhere to social norms in hypothetical allocation games than when real money is at stake (Camerer and Hogarth, 1999;Heyman and Ariely, 2004). As the costs of both fairness and informal sanctioning increase we should find less socially desirable behavior in high-stakes decisions.…”

Section: Monetary Stakesmentioning

confidence: 99%

Using crowdsourced online experiments to study context-dependency of behavior

Keuschnigg

Bader

Bracher

2016

Social Science Research

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We use Mechanical Turk's diverse participant pool to conduct online bargaining games in India and the US. First, we assess internal validity of crowdsourced experimentation through variation of stakes ($0, $1, $4, and $10) in the Ultimatum and Dictator Game. For cross-country equivalence we adjust the stakes following differences in purchasing power. Our marginal totals correspond closely to laboratory findings. Monetary incentives induce more selfish behavior but, in line with most laboratory findings, the particular size of a positive stake appears irrelevant. Second, by transporting a homogeneous decision situation into various living conditions crowdsourced experimentation permits identification of context effects on elicited behavior. We explore contextdependency using session-level variation in participants' geographical location, regional affluence, and local social capital. Across "virtual pools" behavior varies in the range of stake effects. We argue that quasi-experimental variation of the characteristics people bring to the experimental situation is the key potential of crowdsourced online designs.

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The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework

Cited by 1,055 publications

References 87 publications

A Discounting Framework for Choice With Delayed and Probabilistic Rewards.

A Discounting Framework for Choice With Delayed and Probabilistic Rewards.

Learning to cooperate without awareness in multiplayer minimal social situations

Using crowdsourced online experiments to study context-dependency of behavior

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