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Pay Few Subjects but Pay Them Well: Cost-Effectiveness of Random Incentive Systems

Author

Listed:
  • Christoph March
  • Anthony Ziegelmeyer
  • Ben Greiner
  • René Cyranek

Abstract

Most large-scale economic experiments use a between-subjects random incentive system-BRIS-which selects a subset of the participants at random and offers real payment only to the selected participants. We evaluate the relative impact of nominal payoffs and the selection probability on the incentive effectiveness of BRIS. High nominal payoffs and a tiny but unknown selection probability induce the monetary incentives in a large-scale Internet treatment. Two laboratory treatments complement the Internet treatment, one with high nominal payoffs and a moderate selection probability and the other with moderate nominal payoffs and a high selection probability. For the majority of our participants nominal payoffs have a bigger impact on the incentive effectiveness of BRIS than the probability of payment and the latter hardly dilutes the effects of monetary incentives. Our results suggest that cost-effective BRIS consist of high nominal payoffs and a small selection probability.

Suggested Citation

  • Christoph March & Anthony Ziegelmeyer & Ben Greiner & René Cyranek, 2016. "Pay Few Subjects but Pay Them Well: Cost-Effectiveness of Random Incentive Systems," CESifo Working Paper Series 5988, CESifo.
    • Handle: RePEc:ces:ceswps:_5988
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    References listed on IDEAS

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    Cited by:

    1. Faia, Ester & Fuster, Andreas & Pezone, Vincenzo & Zafar, Basit, 2021. "Biases in information selection and processing: Survey evidence from the pandemic," SAFE Working Paper Series 307, Leibniz Institute for Financial Research SAFE.
    2. Tatarnikova, Olga & Duchêne, Sébastien & Sentis, Patrick & Willinger, Marc, 2023. "Portfolio instability and socially responsible investment: Experiments with financial professionals and students," Journal of Economic Dynamics and Control, Elsevier, vol. 153(C).
    3. Galizzi, Matteo M. & Machado, Sara R. & Miniaci, Raffaele, 2016. "Temporal stability, cross-validity, and external validity of risk preferences measures: experimental evidence from a UK representative sample," LSE Research Online Documents on Economics 67554, London School of Economics and Political Science, LSE Library.
    4. Greiner, Ben & Grünwald, Philipp & Lindner, Thomas & Lintner, Georg & Wiernsperger, Martin, 2024. "Incentives, Framing, and Reliance on Algorithmic Advice: An Experimental Study," Department for Strategy and Innovation Working Paper Series 01/2024, WU Vienna University of Economics and Business.
    5. Lisa R. Anderson & Beth A. Freeborn & Patrick McAlvanah & Andrew Turscak, 2023. "Pay every subject or pay only some?," Journal of Risk and Uncertainty, Springer, vol. 66(2), pages 161-188, April.

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    More about this item

    Keywords

    cost-effectiveness; random incentive system; large-scale experiments; risk aversion; decision error;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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