Speaker
Description
Economic experiments are commonly used to study the behaviour of economic actors and generate policy insights (Levitt & List, 2009). A key concern in these experiments is incentive compatibility, ensuring that participants make decisions based on their true preferences, allowing researchers to derive valid conclusions on real-world behaviour. In many experiments, incentive compatibility is achieved by requiring participants to pay for a randomly selected choice (Lusk & Schroeder, 2004). Paying for the binding choice with personal money has been found to strengthen incentive compatibility (Moser, et al., 2014), but is not always feasible, particularly in low-income settings (e.g., Alemu & Olsen, 2018). An alternative approach is to provide a participation fee, paid in cash or electronically, from which participants must pay for their choice (e.g., Lusk & Schroeder, 2004). While this approach is widely used, little attention has been given to whether the mode of payment (cash vs. electronic) affects decisions.
Earlier studies have found that electronic money is spent more easily than cash (Prelec and Simester, 2001) with differences in mental accounting, cognitive distance or temporal separation possibly explaining these results. Studies on donations find public giving to be higher than private giving (Alpizar et al., 2008) and donations in cash to be higher than in electronic form (Soetevent, 2005). These studies suggest that people may perceive cash as more visible and tangible, creating a stronger sense of sacrifice and/or giving a stronger signal of abiding to the social norm. While these studies suggest that payment mode might indeed matter for consumers' price sensitivity and participant expectancy bias, no evidence exists on how this may impact experimental practice.
This study investigates how payment mode (cash vs electronic) affects preferences of consumers in a DCE with information treatment. We use data from a DCE among maize consumers in Nigeria with a random information treatment on food safety risks, comparing preferences for tested and untested maize. About half of participants were paid in cash, and half in electronic form. Our preliminary findings suggest that, in the control setting, consumers are more price sensitive when paid in cash compared to electronic. In the information treatment group, however, consumers with cash payments show lower price sensitivity and higher preference for the "recommended" (tested-safe) maize options. We discuss the potential psychological mechanisms behind these results and the implications for the validity and robustness of findings in economic experiments more broadly.
| Keywords | Payment mode, experimental validity, DCE, participant expectancy bias |
|---|---|
| Status of your work | First results |
| Early Career Researcher Award | Yes, the paper is eligible |
