Experimental Design
To investigate the underlying behavioral mechanisms that drive people toward betting products offering dynamic decision-making opportunities (e.g., cash-out bets), we will conduct controlled economic experiments in a laboratory setting. There will be four groups of participants, corresponding to four different treatments. We will test how betting decisions differ among these groups. Each participant will be asked to decide how much money they would like to bet on the outcome of nine (09) simulated games, which are identical across the four treatments; i.e., games will have identical probabilities and identical payouts. Identical games across the four groups will help control the factors that could otherwise influence betting decisions. The difference among these treatments are discussed by following.
Treatment 1: Non-cash out bets: Participants will be offered with fair bets showing the probability of winning and the payout for each dollar bet. However, participants will be provided with a payout calculator on the game screen, which will be optional to use. Using intuition, participants will decide on the optimal level of betting stakes.
Treatment 2: Cashing out at the half time: Bets will have identical probabilities and payouts to Treatment 1, but participants will be offered an additional option to cash out. They can cash out during the half time of the game if they choose to.
Treatment 3: Cash-out bets with plans: This treatment is identical to Treatment 2 but with an additional step: participants will be asked in advance to reveal their plans about their choice of cashing-out. Their stated plans will be compared with their actual choices, allowing us to identify deviations from planned choices.
Treatment 4: cash-out anytime: Participants will face identical cash-out bets, but here they can cash out at any time during the game before it ends, not just at the halfway point.
All four treatments will present the payout of each dollar bet explicitly, including any cash-out amount. In our experiment, as the games are objective, the value of probability information given in the experiment is free from human judgment. Each participant will undergo only one of these four treatments, making this experiment a cross-subject design. For each round, participants will be given a virtual endowment of 10 dollars in the programmed experiment in Z-tree, from which they can allocate their stakes between 0 and 10 dollars. The difference between their endowment and the betting stake will be part of their earnings from the experiment. The other part will be the payout from the bet, received only if the game is won.