An Offer You Can't Refuse? Testing Undue Inducement

Sandro Ambuehl
Authors registered in the RePEc Author Service: Sandro Ambühl

No 6296, CESifo Working Paper Series from CESifo

Abstract: Around the world, laws limit incentives for transactions such as clinical trial participation, egg donation, or gestational surrogacy. A key reason is the notion of undue inducement−the conceptually vague and empirically largely untested idea that incentives cause harm by distorting individual decision making. Two experiments, including one based on a highly visceral transaction, show that incentives bias information search. Yet, such behavior is also consistent with Bayes-rational behavior. I develop a criterion that indicates whether choices admit welfare weights on benefit and harm that justify permitting the transaction but capping incentives. In my experimental data, no such weights exist.

Keywords: incentives; undue inducement; repugnant transactions; information acquisition; experiment (search for similar items in EconPapers)
JEL-codes: D03 D04 D84 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-cbe, nep-des and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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