Hypothetical and Real Incentives in the Ultimatum Game and Andreoni's Public Goods Game: An Experimental Study

Abstract

In economics experiments, the use of hypothetical incentives is generally restricted to classroom examples; however hypothetical incentives have a clear cost-saving appeal. Although some published experiments have been conducted under the assumption that people act in the same manner with hypothetical incentives as with real ones, it is generally assumed that only real incentives generate economic behavior. Comparing hypothetical to real incentives, we find that in the Ultimatum Game hypothetical incentives do not consistently provide the same results as real incentives; in Andreoni’s Public Goods Game hypothetical incentives produce results that are statistically indistinguishable from those seen with real incentives.