Rationale for Financial Incentives in Economic Studies
An economist is designing a study to see how willing people are to cooperate in a group task. Explain why the economist would likely choose to reward participants with real money based on their performance, rather than using a hypothetical point system.
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CORE Econ
Ch.4 Strategic interactions and social dilemmas - The Economy 2.0 Microeconomics @ CORE Econ
The Economy 2.0 Microeconomics @ CORE Econ
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An economist designs an experiment to study generosity. In one condition, participants decide how to split 100 hypothetical points with a stranger. In a second condition, they decide how to split $100 with a stranger. The economist finds that participants offer a significantly larger share of the total to the stranger in the hypothetical points condition. Which statement best analyzes this outcome from the perspective of experimental design?
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Rationale for Financial Incentives in Economic Studies
In an experiment designed to study cooperation, paying participants small but real amounts of money based on their decisions is unlikely to produce more realistic behavior than simply having them play for hypothetical points.
An economist is studying risk aversion and sets up two versions of an experiment. In Version 1, participants choose between receiving a guaranteed 50 'game points' or a 50% chance of winning 100 points. In Version 2, participants choose between receiving a guaranteed $5 or a 50% chance of winning $10. The economist observes that participants in Version 2 are significantly more likely to choose the guaranteed $5 than participants in Version 1 are to choose the guaranteed 50 points. Which statement provides the best analysis of this outcome based on principles of experimental design?
A researcher is designing an experiment to measure how long individuals will persist on a difficult and tedious puzzle. In one version of the experiment, participants are paid a fixed amount for their time, regardless of whether they solve the puzzle. In a second version, they are paid the same fixed amount for their time, plus a significant cash bonus if they successfully solve the puzzle. According to the principles of experimental design, what is the primary reason for including the second version with the cash bonus?
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