Pay Few Subjects But Pay Them Well: Cost-Effectiveness of Random Incentive Systems

53 Pages Posted: 11 Aug 2016

See all articles by Christoph March

Christoph March

Government of the Federal Republic of Germany - Federal Ministry of Education and Research; University of Bamberg

Anthony Ziegelmeyer

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics; Queen's University Belfast - Queen's Management School

Ben Greiner

Vienna University of Economics and Business

René Cyranek

Ludwig Maximilian University of Munich

Date Written: July 12, 2016

Abstract

Most large-scale economic experiments use a between-subjects random incentive system-BRIS-which selects a subset of the participants at random and offers real payment only to the selected participants. We evaluate the relative impact of nominal payoffs and the selection probability on the incentive effectiveness of BRIS. High nominal payoffs and a tiny but unknown selection probability induce the monetary incentives in a large-scale Internet treatment. Two laboratory treatments complement the Internet treatment, one with high nominal payoffs and a moderate selection probability and the other with moderate nominal payoffs and a high selection probability. For the majority of our participants nominal payoffs have a bigger impact on the incentive effectiveness of BRIS than the probability of payment and the latter hardly dilutes the effects of monetary incentives. Our results suggest that cost-effective BRIS consist of high nominal payoffs and a small selection probability.

Keywords: cost-effectiveness, random incentive system, large-scale experiments, risk aversion, decision error

JEL Classification: C910, C930, D120, D810

Suggested Citation

March, Christoph and Ziegelmeyer, Anthony and Greiner, Ben and Cyranek, René, Pay Few Subjects But Pay Them Well: Cost-Effectiveness of Random Incentive Systems (July 12, 2016). CESifo Working Paper Series No. 5988, Available at SSRN: https://ssrn.com/abstract=2821053 or http://dx.doi.org/10.2139/ssrn.2821053

Christoph March (Contact Author)

Government of the Federal Republic of Germany - Federal Ministry of Education and Research ( email )

Hannoversche Straße 28 - 30
Berlin, 10115
Germany

University of Bamberg ( email )

Kirschaeckerstrasse 39
Bamberg, 96045
Germany

Anthony Ziegelmeyer

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Economics ( email )

Kahlaische Strasse 10
D-07745 Jena, 07745
Germany

Queen's University Belfast - Queen's Management School ( email )

Riddel Hall
185 Stranmillis Road
Belfast, BT9 5EE
United Kingdom

Ben Greiner

Vienna University of Economics and Business

Welthandelsplatz 1
Vienna, Wien 1020
Austria

René Cyranek

Ludwig Maximilian University of Munich ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

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