# An experimental test of whether financial incentives constitute undue inducement in decision-making

Authors: Sandro Ambuehl
Venue: Nature Human Behaviour, 2024, 8(5): 835-845
Year: 2024
Source: https://www.nature.com/articles/s41562-024-01817-8
PDF: https://sandroambuehl.com/assets/papers/financial-incentives-undue-inducement.pdf
Plain text version: https://sandroambuehl.com/assets/plain-text/financial-incentives-undue-inducement.tex
LaTeX source bundle: https://sandroambuehl.com/assets/plain-text/financial-incentives-undue-inducement.tex
Appendix: https://sandroambuehl.com/assets/papers/financial-incentives-undue-inducement-appendix.pdf
Replication package: https://doi.org/10.7910/DVN/3PFZKP

## Abstract

Around the world, laws limit the incentives that can be paid for transactions such as human research participation, egg donation, or gestational surrogacy. A key reason are concerns about undue inducement: the influential but empirically untested idea that incentives cause harm by distorting individual decision making. Two experiments, including one based on a highly visceral transaction, show that incentives cause biased information search.
Contrary to common interpretations, such behavior is no proof for harmful effects of incentives; it is consistent with Bayesian rationality. Empirically, a substantial minority of participants make bad decisions, but incentives do not magnify them in a way that would justify allowing a transaction but capping incentives.

## Additional Links

- Media - Freakonomics Radio: https://freakonomics.com/podcast/disgust/
- Media - NPR: https://www.npr.org/2019/02/27/698563807/for-sale-by-owner-the-psychology-of-repugnant-transactions
- Media - Washington Post: https://www.washingtonpost.com/news/wonk/wp/2015/12/11/the-secret-to-why-money-is-so-good-at-changing-peoples-minds/
- Media - Virtual Market Design Seminar: https://youtu.be/8ANkw6DsNlo