Who Opts In? Composition Effects and Disappointment from Participation Payments

Sandro Ambuehl, Axel Ockenfels and Colin Stewart
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Sandro Ambuehl: University of Zurich

The Review of Economics and Statistics, 2025, vol. 107, issue 1, 78-94

Abstract: Participation payments are used in many transactions about which people know little but can learn more: incentives for medical trial participation, signing bonuses for job applicants, or price rebates on consumer durables. Who opts into the transaction when given such incentives? We theoretically and experimentally identify a composition effect whereby incentives disproportionately increase participation among those for whom learning is harder. Moreover, these individuals use less information to decide whether to participate, which makes disappointment more likely. The learning-based composition effect is stronger in settings in which information acquisition is more difficult.

Date: 2025
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