Pay Every Subject or Pay Only Some?

57 Pages Posted: 6 Mar 2019 Last revised: 23 Feb 2020

See all articles by Lisa R. Anderson

Lisa R. Anderson

College of William and Mary - Department of Economics

Beth Freeborn

Government of the United States of America - Federal Trade Commission

Patrick McAlvanah

Federal Trade Commission - Bureau of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 3, 2019

Abstract

One technique employed by budget-conscious researchers is to pay only some subjects for their choices in an experiment, or pay smaller stakes to all subjects. We test the effect of paying some subjects versus paying all subjects in the context of risk preferences, controlling for the difference in stakes induced by paying only some subjects. Over two experiments, we demonstrate that paying some subjects yields lower levels of risk aversion than paying all subjects, but more risk aversion than paying all subjects lower stakes. Paying some subjects also impacts the ordering of subjects by elicited risk aversion. Neither probability weighting nor standard experimental demographics were correlated with subjects' differences between these conditions. We exploit our multiple measurements of risk aversion to estimate a simple structural model of latent risk aversion and derive a correction factor to approximate the results as if all subjects were paid high stakes. Our findings imply that paying some subjects high stakes meaningfully impacts the elicited level of risk aversion, although it better approximates the experimental ideal of paying all subjects high stakes compared to paying all subjects lower stakes.

Keywords: experimental economics, methodology, incentives in experiments, pay some subjects, risk preferences, risk elicitation

JEL Classification: C90, D81

Suggested Citation

Anderson, Lisa R. and Freeborn, Beth and McAlvanah, Patrick, Pay Every Subject or Pay Only Some? (July 3, 2019). Available at SSRN: https://ssrn.com/abstract=3334695 or http://dx.doi.org/10.2139/ssrn.3334695

Lisa R. Anderson

College of William and Mary - Department of Economics ( email )

Williamsburg, VA 23187-8795
United States

Beth Freeborn

Government of the United States of America - Federal Trade Commission ( email )

600 Pennsylvania Ave., NW
Washington, DC 20580
United States

Patrick McAlvanah (Contact Author)

Federal Trade Commission - Bureau of Economics ( email )

600 Pennsylvania Ave NW
Mail Drop HQ238
Washington, DC 20580
United States

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