On the (Ir)Relevance of Monetary Incentives in Risk Preference Elicitation Experiments

46 Pages Posted: 3 Sep 2020

See all articles by Andreas Hackethal

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration; Leibniz Institute for Financial Research SAFE

Michael Kirchler

University of Innsbruck

Christine Laudenbach

University of Bonn

Michael Razen

affiliation not provided to SSRN

Annika Weber

Goethe University Frankfurt; Leibniz Institute for Financial Research SAFE

Date Written: August 31, 2020

Abstract

Incentivized experiments in which individuals receive monetary rewards according to the outcomes of their decisions are regarded as the gold standard for preference elicitation in experimental economics. These task-related real payments are considered necessary to reveal subjects' "true preferences". Using a systematic, large-sample approach with three subject pools of private investors, professional investors, and students, we test the effect of task-related monetary incentives on risk preferences elicited in four standard experimental tasks. We find no systematic differences in behavior between subjects in the incentivized and non-incentivized regimes. We discuss implications for academic research and for applications in the field.

Keywords: Risk Preferences; Incentives; Experimental Economics; Risk Aversion

JEL Classification: C91 D01 D81

Suggested Citation

Hackethal, Andreas and Kirchler, Michael and Laudenbach, Christine and Razen, Michael and Weber, Annika, On the (Ir)Relevance of Monetary Incentives in Risk Preference Elicitation Experiments (August 31, 2020). SAFE Working Paper No. 286, Available at SSRN: https://ssrn.com/abstract=3678753 or http://dx.doi.org/10.2139/ssrn.3678753

Andreas Hackethal

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno Platz 3
Frankfurt am Main, 60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Michael Kirchler

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

Christine Laudenbach (Contact Author)

University of Bonn ( email )

Bonn, 53113
Germany

Michael Razen

affiliation not provided to SSRN

Annika Weber

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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