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Whose money is it anyway? Using prepaid incentives in experimental economics to create a natural environment

Published online by Cambridge University Press:  14 March 2025

Mosi Rosenboim  and
Tal Shavit
Mosi Rosenboim
Affiliation:
Department of Management, Guilford Glazer Faculty of Business and Management, Ben-Gurion University of the Negev, Be'er Sheva, 84105, Israel Sapir Academic College, Department of Applied Economics, Sderot, 79165, Israel
Tal Shavit*
Affiliation:
School of Business Administration, College of Management Academic Studies, Rishon Lezion, 75190, Israel
*
[email protected]
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Abstract

Simulating a real world environment is of utmost importance for achieving accurate and meaningful results in experimental economics. Offering monetary incentives is a common method of creating this environment. In general, experimenters provide the rewards at the time of experiment. In this paper, we argue that receiving the reward at the time of the experiment may lead participants to make decisions as if the money they are using were not their own. To solve this problem, we devised a “prepaid mechanism” that encourages participants to use the money as if it were their own.

Keywords

Second-price auctionLoss aversionTrust gameMonetary incentiveExperimentFinancial decision makingReward

JEL classification

C91: Laboratory, Individual Behavior
Type
Original Paper
Information
Experimental Economics , Volume 15 , Issue 1 , March 2012 , pp. 145 - 157
Copyright
Copyright © 2011 Economic Science Association

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Footnotes

Electronic supplementary material The online version of this article (doi:https://doi.org/10.1007/s10683-011-9294-4) contains supplementary material, which is available to authorized users.

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Supplementary material: File

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