Work

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

Year: 2021

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 (monetaryvs. environmental good) effects in both risk and discounting.

Source: Journal of Risk and Uncertainty

DOI: 10.1007/s11166-021-09354-9

Authors: Emmanouil Mentzakis, Jana Sadeh

Institution: University of Southampton

Language: English

Topic: Decision-Making and Behavioral Economics

Subfield: General Decision Sciences

Field: Decision Sciences

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $2,780

Funders: University of Southampton, Economic and Social Research Council