On the (Ir)Relevance of Monetary Incentives in Risk Preference Elicitation Experiments
46 Pages Posted: 3 Sep 2020
Date Written: August 31, 2020
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: Suggested Citation