Incentive Magnitude Effects in Experimental Games: Bigger is not Necessarily Better

Abstract

In experimental games, task-related incentives are payments to experimental subjects that vary according to their strategy choices and the consequent outcomes of the games. Limited evidence exists regarding incentive magnitude effects in experimental games. We examined one-off strategy choices and self-reported reasons for choices in eight 3 × 3 and four 4 × 4 normal-form games under task-related incentives of conventional magnitude and compared them with choices and reasons in the same games under incentives five times as large. Both strategy choices and self-reported reasons for choices were almost indistinguishable between the two conditions. These results are in line with earlier findings on individual decision making and with a parametric model, in which the incentive elasticity of effort is very small when compared with other factors, such as the complexity of the decision problem.

Keywords

• capital-labor-production framework
• crowding out
• experimental games
• incentives
• incentive elasticity of effort
• reasons for choices