The Review of Austrian Economics, 18:2, 169–178, 2005.
2005 Springer Science + Business Media, Inc. Manufactured in The Netherlands.
Entrepreneurial Discovery and the Demmert/Klein
Experiment: Another Attempt at Creating the
JANA KITZMANN firstname.lastname@example.org
DIRK SCHIERECK email@example.com
European Business School, International University, Schloss Reichartshausen, 65375 Oestrich-Winkel, Germany
Abstract. Friedrich Hayek conjectured that the free enterprise system is the most effective in making discoveries,
and Israel Kirzner reﬁnes the conjecture by saying that proﬁt opportunities evoke entrepreneurial discovery.
Demmert and Klein (2003) present the ﬁrst attempt to demonstrate the Hayek/Kirzner conjecture. On the whole,
Demmert and Klein (2003) classify the results as disappointing but fruitful. In contrast we argue that additional
experimental evidence might yield a demonstration of the conjecture. We continued the diligence and good-faith
effort started by Demmert and Klein (2003) to devise an experimental setting that would create a genuine context
for entrepreneurial discovery, yet the conjecture eludes our efforts at controlling the experiment. We duplicated
the experiment at a Business School in Germany, with two simple variations. First, Demmert and Klein (2003)
recruited only male students. We include male and female students. Second, Demmert and Klein (2003) used a
payment schedule that includes a ﬂat rate for participation and additional earnings depending on the presented
performance. We drop the ﬂat rate and slightly reduce the earnings per unit outperformance. Our results show
that overall money matters. Our results are rather like those of Demmert and Klein (2003) and do not seem to be
inﬂuenced by a baseline payment. Moreover, there are gender speciﬁc divergences showing male students earning
signiﬁcant higher additional earnings than their female fellow students.
KeyWords: cross country divergences, entrepreneurial discovery, gender speciﬁca, monetary rewards
JEL classiﬁcation: A1, D0
Friedrich Hayek (1978) conjectured that the free enterprise system is the most effective in
making discoveries. He emphasized the “role of knowledge and its enhancement through
hypothesizing that market participants, in order to approach an equi-
librium state, would have to gain a better mutual understanding of their actions and plans.
In other words, it must be explained by what process the market participants acquire the
This is predominantly the process of competition in a free enterprise
Hayek regarded the latter as a discovery procedure, in which individuals would
generate “such facts as, without resort to it, would not be known to anyone”.
(1985) reﬁnes Hayek’s conjecture by assuming that the availability of proﬁt opportuni-
ties tends to evoke entrepreneurial discovery. He conjectured that the market participants’
entrepreneurial discovery would be evoked if they saw an opportunity for proﬁt (“alert-
ness”). The higher the degree of freedom in a society, the better it would be able to discover