Optimal Use of Incentives in Economic Experiments

Chapter 19 — Optimal Use of Incentives in Economic Experiments Every design decision is ultimately an incentive decision. This chapter develops a unified economic model of experimental resource allocation, showing that the optimal design equalizes the marginal benefit of the last dollar spent across all design elements—from subject recruitment and treatment intensity to measurement, mediation, compliance, and creating the appropriate microeconomic environment. Violations of this optimality condition point directly to where resources should be reallocated. The framework integrates the lessons of the entire book into a single coherent principle for the optimizing experimenter.

1. The optimal allocation of experimental resources permeates every layer of experimental design, from the type of experiment conducted, to achieving EP1 and EP2, to creating the appropriate microeconomic environment.
2. Insights from a simple economic model govern design choices for the optimizing experimenter.
3. An intuitive general prediction emerges from this framework: incentives spent should be allocated to equalize the marginal benefit from the last dollar spent across the various design elements.
4. When this condition is violated, the model provides areas for reallocation that enhance the efficacy of the experimental design.