Re: Incentives: Money, grade points, or sheer fun?


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Posted by Paul J. Brewer on January 21, 1998 at 01:58:48:

In Reply to: Incentives: Money, grade points, or sheer fun? posted by Greg Delemeester on December 02, 1996 at 19:28:43:

Money:
Money works fairly well. It really
doesn't cost all that much... maybe $100 for
one market demonstration.

Grades:
I have used grades with my MBA students
for incentives in a market experiment. I think
it is very important here that the incentive
scheme involve the possibility for a continuum of
outcomes and not be a zero-sum game.

here is how I satisfy these requirements.
Calculate the market equilibrium ahead of time
from the costs and redemption values you are going
to use. An individuals grade will equal their
trading profit divided by the equilibrium profit
for someone in their position. Notice that this
is not zero sum. Grades are not curved, and tend
to range from 50 to 140. Most grades will be in
the OK range, especially if you let the experiment
run for several periods.

In my MBA classes, this experiment
is usually the first classroom activity.

This has the additional effect of getting
people who can not add or manage simple instructions
to drop the course.

Paul J. Brewer
pjb@gosolveit.com


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