Does Stake Size Matter? Testing for Differences in Involuntary Responses under Laboratory and Online Sized Stakes

Abstract

Using a laboratory experiment, we explore physiological responses to high and low stakes lotteries to investigate how subjects react to risk and stake magnitude. In the experiment, subjects are linked to devices measuring their electrodermal activity and heart rate. Subjects are endowed with ten dollars and told they will participate in a lottery that increases or decreases their earnings, with equal probability. There are two treatments: one with low stakes and one with high stakes. We find that heart rate is largely unaffected but skin conductance increases significantly in all treatments once subjects are informed that they will play the lottery, with the effect being larger in the high stakes treatment. Being told the outcome of the lottery reduced skin conductance in both treatments, but the effects were not statistically different. Our results are compatible with studies showing only small differences in decisions across experiments using laboratory and low/online stakes.