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Experimental evidence on the effect of incentives and domain in risk aversion and discounting tasks

Experimental evidence on the effect of incentives and domain in risk aversion and discounting tasks
Experimental evidence on the effect of incentives and domain in risk aversion and discounting tasks
Environmental policy evaluation is often criticised for employing discount rates that have little grounding in research. Yet, experimental research aimed at eliciting realistic rates will inevitably require strong assumptions of external validity, while also placing large cognitive demands on subjects by processing tasks of increased unfamiliarity. We use a controlled lab experiment to test the impact of incentives on risk aversion and discounting tasks for monetary and environmental goods. We find that, on average, incentives have little effect on risk aversion or discounting tasks in either domain. Exploring heterogeneity by treatment and socio-demographics some significant patterns emerge. Further, contrary to past work, we find evidence of domain (monetary vs: environmental good) effects in both risk and discounting.
0895-5646
Mentzakis, Emmanouil
c0922185-18c7-49c2-a659-8ee6d89b5d74
Sadeh, Jana
27159892-0083-415f-b50f-a0c4e4e1ec5d
Mentzakis, Emmanouil
c0922185-18c7-49c2-a659-8ee6d89b5d74
Sadeh, Jana
27159892-0083-415f-b50f-a0c4e4e1ec5d

Mentzakis, Emmanouil and Sadeh, Jana (2021) Experimental evidence on the effect of incentives and domain in risk aversion and discounting tasks. Journal of Risk and Uncertainty. (In Press)

Record type: Article

Abstract

Environmental policy evaluation is often criticised for employing discount rates that have little grounding in research. Yet, experimental research aimed at eliciting realistic rates will inevitably require strong assumptions of external validity, while also placing large cognitive demands on subjects by processing tasks of increased unfamiliarity. We use a controlled lab experiment to test the impact of incentives on risk aversion and discounting tasks for monetary and environmental goods. We find that, on average, incentives have little effect on risk aversion or discounting tasks in either domain. Exploring heterogeneity by treatment and socio-demographics some significant patterns emerge. Further, contrary to past work, we find evidence of domain (monetary vs: environmental good) effects in both risk and discounting.

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Incentives_EMJSv3 - Accepted Manuscript
Restricted to Repository staff only until 4 May 2022.
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More information

Accepted/In Press date: 4 May 2021

Identifiers

Local EPrints ID: 449534
URI: http://eprints.soton.ac.uk/id/eprint/449534
ISSN: 0895-5646
PURE UUID: 869b91a4-ee49-4570-98e2-3bb9a9f980fa
ORCID for Emmanouil Mentzakis: ORCID iD orcid.org/0000-0003-1761-209X
ORCID for Jana Sadeh: ORCID iD orcid.org/0000-0001-8237-8987

Catalogue record

Date deposited: 04 Jun 2021 16:32
Last modified: 05 Jun 2021 01:51

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