Abstract
This paper presents an experiment that evaluates the effect of financial incentives and complexity in political science voting experiments. To evaluate the effect of complexity we adopt a level-k reasoning model concept. This model by Nagel [1] postulates that players might be of different types, each corresponding to the level of reasoning in which they engage. Furthermore, to postulate the effect of financial incentives on subjects’ choice, we used the Quantal Response Equilibrium (QRE) concept. In a QRE, players’ decisions are noisy, with the probability of playing a given strategy increasing in its expected payoff. Hence, the choice probability is a function of the magnitude of the financial incentives. Our results show that low complexity promotes the highest degree of level-k strategic reasoning in every payment treatment. Standard financial incentives are enough to induce equilibrium behavior, and the marginal effect of extra incentives on equilibrium behavior seems to be negligible. High complexity, instead, decreases the rate of convergence to equilibrium play. With a sufficiently high complexity, increasing payoff amounts does promote more strategic behavior in a significant manner. Our results show with complex voting games, higher financial incentives are required for the subjects to exert the effort needed to complete the task.
Highlights
Financial incentives are used in political science election and committee voting experiments to control or induce individual preferences posited by the theory that is being tested
To converge toward expected equilibrium outcomes, i.e., does increasing financial incentives make for better subjects since they will be more focused on task performance, or do financial incentives have a diminutive effect such that increasing incentives only trivially affects performance? This issue is important because there is general consensus that financial incentives are needed but what is not known is how much is enough to induce behavior dictated by Induced Value Theory (IVT). This theory assumes that if an experimenter follows its precepts financial incentives motivate subjects to devote all of their cognitive attention to task performance; experiments have shown that subjects often deviate from the experimental task, and the concern is whether these deviations are a result of failure of the experimenter to fulfil the conditions of IVT [8]
In this article we examine the tenants of IVT by reporting on experiments that measure the interaction of financial incentives and cognitive ability by varying simple and complex cognitive tasks
Summary
Financial incentives are used in political science election and committee voting experiments to control or induce individual preferences posited by the theory that is being tested. This theory assumes that if an experimenter follows its precepts financial incentives motivate subjects to devote all of their cognitive attention to task performance; experiments have shown that subjects often deviate from the experimental task, and the concern is whether these deviations are a result of failure of the experimenter to fulfil the conditions of IVT [8]. The difference between the two is that strategic behavior entails more (complex) cognitive ability since to maximize utility subjects must vote against their sincere (and higher) preference to prevent getting a lower utility This computation proves to be difficult for subjects in experiments that examine three alternatives (or candidates) where little strategic behavior is found due to the seemingly complex nature of the task [9]. Our results provide evidence that under certain conditions when confronted with complexity increasing financial incentives evoked more strategic behavior resulting in increased convergence to the equilibrium outcome
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