Incentivizing behavior is a foundational principle of experimental economics. Providing sufficiently high monetary incentives that are linked to the outcome variable has been argued to eliminate other motivations that could bias behavior. While scholars in other behavioral sciences have long advocated for critical reflection on the use of monetary incentives, this perspective has only recently gained traction among economists. This is largely due to a recent series of preference-elicitation studies that report little or no difference between measures obtained under incentivized and non-incentivized conditions.
For example, the meta-analysis by Matusek et al., (2022) on time preferences concludes that "it does not matter systematically for the reported discount rates whether experiments use real or hypothetical rewards" (p. 320). Moreover, Branas-Garza et al., (2023) draw on cross-country studies with field and online experiments to demonstrate that time preferences under real and hypothetical monetary incentives are largely comparable. Similarly, Falk et al., (2023) validate a survey module that uses hypothetical monetary incentives, across several preference dimensions. They conclude that these hypothetical measures offer a good compromise and apply this module in one of the largest global preference studies to date.
A common feature of preference-based choice tasks is that non-incentivized conditions link behavior to monetary rewards even though these are only hypothetical.
For instance, Branas-Garza et al., (2023) elicit choices between smaller, sooner and larger, later hypothetical monetary rewards to measure participants' time preferences.
The use of such hypothetical incentives is less common in other behavioral tasks, where non-incentivized conditions typically make no mention of monetary rewards beyond the participation fee. Reviewing a wide range of behavioral tasks, Camerer and Hogarth (1999) find that, unlike in preference-based choice tasks, real monetary incentives affect behavior more systematically in tasks involving judgment, learning, memory and recall, or real-effort provision. The disparity between these two types of non-incentivized conditions raises the question of whether linking behavior to hypothetical incentives differs from not mentioning any link to monetary rewards and how both compare to real ones.
Addressing this research question tests whether people can effectively internalize hypothetical incentives, treating them as motivationally similar to real ones -- a potential explanation for the observed similarity between real and hypothetical incentives in preference-based choice tasks. To this end, we conduct two complementary studies using pre-registered real-effort experiments based on a decoding task Sillamaa (1999a). Real-effort tasks enable a clear comparison between settings in which performance is linked to monetary rewards and settings in which incentives are not mentioned. This comparison is not feasible in preference-based choice tasks where monetary outcomes must be specified by design. To the extent that preference-based choice tasks involve some degree of effort, we would expect to see some trace of this internalization ability in a standard real-effort task. Beyond testing this hypothesis, establishing whether hypothetical incentives can motivate effort has practical implications, potentially offering experimenters a cost-effective alternative to real monetary incentives across a broader range of behavioral tasks
