Journal of Risk and Uncertainty

, Volume 19, Issue 1–3, pp 7–42 | Cite as

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

  • Colin F. Camerer
  • Robin M. Hogarth


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 


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Copyright information

© Kluwer Academic Publishers 1999

Authors and Affiliations

  • Colin F. Camerer
    • 1
  • Robin M. Hogarth
    • 2
  1. 1.Division of Humanities and Social Sciences 228-77California Institute of TechnologyPasadena
  2. 2.University of ChicagoChicago

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