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

Emmanouil Mentzakis and Jana Sadeh

Journal of Risk and Uncertainty, 2021, vol. 62, issue 3, No 1, 203-224

Abstract: 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.

Keywords: Time preferences; Risk aversion; Hypothetical bias; Experimental incentives; Domain effects (search for similar items in EconPapers)
JEL-codes: C51 C91 D81 Q50 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s11166-021-09354-9

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