Experiments outside the lab: the role of incentives

Abstract

The use of hypothetical instead of real (monetary) incentives remains under debate after decades of economic experiments. Paying real money allows researchers to recruit participants for the experiments and reduce the missing data problem. In general, subjects receive a fixed fee and some endowment to make decisions, and the final earnings depend on their choices. In other words, if a subject decides in the experiment to donate a percentage of her profits (see Chapter 4), at the end, this amount of money will be subtracted from her final profits. Hence the decision (to donate or not) fairly simulates real life decisions. In true, paying real money to experimental subjects involves substantial monetary costs due to participants’ earnings and often logistic costs as well. Additionally there other potential problems related to unequal payoffs and differential earnings between subjects. In the field, where the experimenters lose control of the environment, these problems may increase exponentially. For instance, vulnerable populations do not have bank accounts, so experimenters need to carry the cash to make the payments. In deprived areas, this can put at risk then own safety.