nep-neu New Economics Papers
on Neuroeconomics
Issue of 2021‒04‒26
one paper chosen by
Daniel Houser
George Mason University

  1. Cognitive Biases: Mistakes or Missing Stakes? By Benjamin Enke; Uri Gneezy; Brian Hall; David C. Martin; Vadim Nelidov; Theo Offerman; Jeroen van de Ven

  1. By: Benjamin Enke; Uri Gneezy; Brian Hall; David C. Martin; Vadim Nelidov; Theo Offerman; Jeroen van de Ven
    Abstract: Despite decades of research on heuristics and biases, empirical evidence on the effect of large incentives – as present in relevant economic decisions – on cognitive biases is scant. This paper tests the effect of incentives on four widely documented biases: base rate neglect, anchoring, failure of contingent thinking, and intuitive reasoning in the Cognitive Reflection Test. In laboratory experiments with 1,236 college students in Nairobi, we implement three incentive levels: no incentives, standard lab payments, and very high incentives that increase the stakes by a factor of 100 to more than a monthly income. We find that response times – a proxy for cognitive effort – increase by 40% with very high stakes. Performance, on the other hand, improves very mildly or not at all as incentives increase, with the largest improvements due to a reduced reliance on intuitions. In none of the tasks are very high stakes sufficient to de-bias participants, or come even close to doing so.
    JEL: D01 D03
    Date: 2021–04
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:28650&r=all

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