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 play a set of fifteen (15) rounds of games, which are identical across the four treatments; i.e., games will have identical probabilities and identical returns. 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 success and the return from each $1 stake. However, participants will be provided with a profit calculator on the game screen, which will be optional to use. They may or may not use it to calculate the expected income from any betting stake in case of both successful and unsuccessful outcomes. Using intuition, participants will decide on the optimal level of stakes.
Treatment 2: Cashing out at the half time: Bets will have identical probabilities and returns to Treatment 1, but participants will be offered an additional option to cash out. They can cash out during the half time of the round 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 behavior, allowing us to identify deviations from intended decisions.
Treatment 4: cash -out anytime: Participants will face identical cash-out bets, but here they can cash out at any time during the round, not just at the halfway point.
All four treatments will present the payoff from each unit of betting stake 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 8 dollars in the programmed experiment in Z-tree, from which they can allocate their stakes between 0 and 8 dollars. The difference between their endowment and the amount invested will be part of their profit from the investment. The other part will be the return on the bet, received only if it is successful.