On the Role of Monetary Incentives in Risk Preference Elicitation Experiments

57 Pages Posted: 3 Sep 2020 Last revised: 27 Sep 2022

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

SAFE and Goethe University

Michael Razen

University of Innsbruck

Annika Weber

Goethe University Frankfurt; Leibniz Institute for Financial Research SAFE

Date Written: August 30, 2021

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 in four standard experimental tasks. We find no systematic differences in behavior between and within 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 Role of Monetary Incentives in Risk Preference Elicitation Experiments (August 30, 2021). 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)

SAFE and Goethe University ( email )

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

Michael Razen

University of Innsbruck ( email )

Innsbruck
Austria

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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