Financial Incentive Effects and Individual Decision-making

Abstract

Though much of the literature of experimental psychology covers topics that seem relevant to economics, the literature is generally ignored by economists. Possibly the reason for this is that psychologists seldom use financial incentives to motivate subjects' choices. This paper provides an example of an individual decision-making experiment in which the presence or absence of financial incentives affects the subjects' behavior. The observed effects are not marginal but often involve qualitatively different types of responses.

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