Journal of Risk and Uncertainty

, Volume 19, Issue 1, pp 7–42

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

Authors

  • Colin F. Camerer
    • Division of Humanities and Social Sciences 228-77California Institute of Technology
  • Robin M. Hogarth
    • University of Chicago
Article

DOI: 10.1023/A:1007850605129

Cite this article as:
Camerer, C.F. & Hogarth, R.M. Journal of Risk and Uncertainty (1999) 19: 7. doi:10.1023/A:1007850605129

Abstract

We review 74 experiments with no, low, or high performance-based financial incentives. The modal result has 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.

experimental economics rationality bounded rationality judgment incentives experimental methodology

Copyright information

© Kluwer Academic Publishers 1999