The veil of experimental currency units

Andreas Drichoutis, Jayson Lusk and Rodolfo Nayga

MPRA Paper from University Library of Munich, Germany

Abstract: It is common practice to have subjects make decisions which pay out in a fictitious experimental currency. Earnings in the experimental currency are then converted to cash at the end of the experiment. Like many practices in experimental economics, however, these procedural choices seems to be driven more by habit or tradition than by empirical evidence that more desirable outcomes are produced. In this paper, we report the results of an induced value experiment in which we manipulated the exchange rate between the experimental currency and cash. We find virtually no relationship between a stronger/weaker experimental currency and the ability of theory to predict observed outcomes. The only significant effect that was generated relates to the comparison of the cash-only condition to the 1-to-1 exchange condition, with the latter producing greater behavioral deviations from theoretical predictions. The results suggest that experimenters might be able to spread scarce research dollars over more subjects by using weaker experimental currency but using a 1-to-1 conversion between the experimental currency and cash might, in the words of Davis and Holt (1993), "create an artificial 'game-board' sense of speculative competitiveness."

Keywords: experimental currency units; ECU; tokens; Vickrey auction; induced values (search for similar items in EconPapers)
JEL-codes: C90 (search for similar items in EconPapers)
Date: 2013-05-09
New Economics Papers: this item is included in nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://mpra.ub.uni-muenchen.de/52139/1/MPRA_paper_52139.pdf revised version (application/pdf)

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