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Real Incentives Really Matter

Author

Listed:
  • Cristoph Drobner
  • Sebastian Goerg
  • Orestis Kopsacheilis

Abstract

Incentivizing behavior, a core principle of economic experiments, is currently under scrutiny due to a series of papers that find little to no difference in choices made under real or hypothetical incentives. We experimentally assess the effectiveness of hypothetical incentives to induce participants' real effort -- an integral aspect of reliable experimental data. We find that although linking behavior to hypothetical incentives generates modest additional effort compared to no reference to such incentives, hypothetical incentives fall substantially short of real ones, even when their nominal value is radically inflated. To understand the mechanism behind these effects, we systematically vary base pay and piece-rate magnitudes across incentive conditions and structurally estimate a model of costly effort. Although higher base pay increases effort both by increasing non-pecuniary motivation and by enhancing responsiveness to hypothetical incentives, incentive-compatible real paymen

Suggested Citation

  • Cristoph Drobner & Sebastian Goerg & Orestis Kopsacheilis, 2026. "Real Incentives Really Matter," Working Papers 2606, University of Crete, Department of Economics.
    • Handle: RePEc:crt:wpaper:2606
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    References listed on IDEAS

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    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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