Economics Homework Help

Billie the Experimenter wants to test whether greater financial incentives make people work harder.
To do this, Billie created an experiment where subjects solve a series of logic questions. Sixty
subjects were given 15 minutes to complete 20 questions and the experimental sessions lasted
approximately 40 minutes. Subjects also received a $6.00 show-up payment.
There are two treatments. In Treatment #1, a subject is paid $1.00 for each correct answer. In
Treatment #2, a subject is paid $5.00 for each correct answer. Billie then compared performance in
Treatment #1 to performance in Treatment #2.
Overall, Billie finds that performance in Treatment #2 is better than performance in Treatment #1
(i.e. the number of correctly solved problems was higher in Treatment #2). Billie concludes that
large financial incentives lead people to work harder, thereby improving their performance.

Based on this information, in 250 words or less,

1) Describe ONE alternative explanation for Billie’s empirical result observed above. Clearly
state any assumptions you make in your answer about the design, procedure, or subject pool.

2) Design an experimental treatment or set of treatments that would allow you to clarify the
results between Billie’s explanation of “working harder” and your alternative explanation, please include an experimental design table (not included in word count)