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The veil of experimental currency units

Author

Listed:
  • Drichoutis, Andreas
  • Lusk, Jayson
  • Nayga, Rodolfo

Abstract

It is common practice to have subjects make decisions which pay out in a fictitious experimental currency. Earnings in the experimental currency are then converted to cash at the end of the experiment. Like many practices in experimental economics, however, these procedural choices seems to be driven more by habit or tradition than by empirical evidence that more desirable outcomes are produced. In this paper, we report the results of an induced value experiment in which we manipulated the exchange rate between the experimental currency and cash. We find virtually no relationship between a stronger/weaker experimental currency and the ability of theory to predict observed outcomes. The only significant effect that was generated relates to the comparison of the cash-only condition to the 1-to-1 exchange condition, with the latter producing greater behavioral deviations from theoretical predictions. The results suggest that experimenters might be able to spread scarce research dollars over more subjects by using weaker experimental currency but using a 1-to-1 conversion between the experimental currency and cash might, in the words of Davis and Holt (1993), "create an artificial 'game-board' sense of speculative competitiveness."

Suggested Citation

  • Drichoutis, Andreas & Lusk, Jayson & Nayga, Rodolfo, 2013. "The veil of experimental currency units," MPRA Paper 46906, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:46906
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    File URL: https://mpra.ub.uni-muenchen.de/52139/1/MPRA_paper_52139.pdf
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    References listed on IDEAS

    as
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    1. Björn Bartling & Tobias Gesche & Nick Netzer, 2017. "Does the absence of human sellers bias bidding behavior in auction experiments?," Journal of the Economic Science Association, Springer;Economic Science Association, vol. 3(1), pages 44-61, July.
    2. Shen, Junyi & Takahashi, Hiromasa, 2013. "A cash effect in ultimatum game experiments," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 47(C), pages 94-102.

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    More about this item

    Keywords

    experimental currency units; ECU; tokens; Vickrey auction; induced values;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General

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