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The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework

Camerer, Colin F. and Hogarth, Robin M. (1999) The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework. Journal of Risk and Uncertainty, 19 (1-3). pp. 7-42. ISSN 0895-5646. http://resolver.caltech.edu/CaltechAUTHORS:20110208-132914477

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Abstract

We review 74 experiments with no, low, or high performance-based financial incentives. The modal result is no effect on mean performance (though variance is usually reduced by higher payment). Higher incentive does improve performance often, typically judgment tasks that are responsive to better effort. Incentives also reduce "presentation" effects (e.g., generosity and risk-seeking). Incentive effects are comparable to effects of other variables, particularly "cognitive capital" and task "production" demands, and interact with those variables, so a narrow-minded focus on incentives alone is misguided. We also note that no replicated study has made rationality violations disappear purely by raising incentives.


Item Type:Article
Related URLs:
URLURL TypeDescription
http://dx.doi.org/10.1023/A:1007850605129 DOIUNSPECIFIED
http://www.springerlink.com/content/wh218110256r8t00/PublisherUNSPECIFIED
Additional Information:© 1999 Kluwer Academic Publishers. Very helpful comments were received from Baruch Fischhoff, Reid Hastie, John Kagel, Daniel Kahneman, George Loewenstein, Rob MacCoun, Chuck Manski, Richard Thaler, two anonymous referees, and many participants in the NSFrBerkeley Econometrics Lab conference on elicitation of preferences, July/August 1997. Angela Hung provided meticulous research assistance.
Subject Keywords:Experimental economics, rationality, bounded rationality, judgment, incentives, experimental methodology
Classification Code:JEL Classification: B41, D80.
Record Number:CaltechAUTHORS:20110208-132914477
Persistent URL:http://resolver.caltech.edu/CaltechAUTHORS:20110208-132914477
Official Citation:Camerer, C. F. and R. M. Hogarth (1999). "The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework." Journal of Risk and Uncertainty 19(1): 7-42.
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:22080
Collection:CaltechAUTHORS
Deposited By: Tony Diaz
Deposited On:14 Feb 2011 19:12
Last Modified:26 Dec 2012 12:54

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