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Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title Can incentives cause harm? Tests of undue inducement
Organization Unit
  • Sandro Ambühl
  • English
Series Name SSRN
Number 2830171
ISSN 1556-5068
Number of Pages 51
Date 2021
Abstract Text Around the world, laws limit incentives for transactions such as human research participation, egg donation, or gestational surrogacy. A key reason is the notion of undue inducement - the conceptually vague and empirically largely untested idea that incentives cause harm by distorting individual decision making. Two experiments, including one based on a highly visceral transaction, show that incentives bias information search. Yet, such behavior is also consistent with Bayes-rational behavior. I develop a criterion that indicates whether choices admit welfare weights on benefit and harm that justify permitting the transaction but capping incentives. In my experimental data, no such weights exist.
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Digital Object Identifier 10.2139/ssrn.2830171
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Keywords Incentives, repugnant transactions, information acquisition, rational inattention, experiment, individual choice