Financial incentives and payment mechanisms in experimental economics

Abstract

The experimental economics has been an effective tool for analyze the subjects’ behaviour above all in laboratory experiments. There are two important methodological aspects that they have been at the centre of many debates. Firstly, the financial incentives may differ between psychologists and economists because the psychologists do not trust on the validity of monetary rewards. Furthermore, this incentive is influence on three factors: cognitive exertion, motivational focus and emotional triggers. Secondly, in some experiments participants make multiple decisions; for that we can use two methods of payment mechanisms. We study the method pay all and pay one in different environments. In most study reviews we do not find a significant difference between using pay all or one. Then, our study analyzes the Random Incentive System (RIS). This is widely used in experimental economics to motivate subjects. Additionally, the usefulness of RIS allows us to avoid the wealth effect. Finally, we can find some problems of ambiguity if we use the RIS.