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Time is money - Time pressure, incentives, and the quality of decision-making

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Author Info
Martin G. Kocher
Matthias Sutter ()

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Abstract

Many decisions in economics and finance have to be made under severe time pressure. Furthermore, payoffs frequently depend on the speed of decision-making, like, for instance, when buying and selling stocks. In this paper, we examine the influence of time pressure and time-dependent incentive schemes on the quality of decision-making in an experimental beauty-contest game. We find that convergence to equilibrium is faster and payoffs are higher under low time pressure than under high time pressure. Interestingly, time-dependent payoffs under high time pressure lead to significantly quicker decision-making without reducing the quality of decisions.

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Publisher Info
Paper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2004-05.

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Length: 30 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:esi:discus:2004-05

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Related research
Keywords: quality of decision-making; time pressure; incentives; beauty-contest experiment;

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Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Martin G. Kocher & Matthias Sutter, 2004. "The Decision Maker Matters: Individual versus Group Behaviour in Experimental Beauty-Contest Games," Papers on Strategic Interaction 2004-09, Max Planck Institute of Economics, Strategic Interaction Group. [Downloadable!]
    Other versions:
  2. Camerer, Colin, . "Progress and Behavioral Game Theory," Working Papers 1004, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  3. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December. [Downloadable!] (restricted)
  4. Weber, Roberto A., 2003. "'Learning' with no feedback in a competitive guessing game," Games and Economic Behavior, Elsevier, vol. 44(1), pages 134-144, July. [Downloadable!] (restricted)
  5. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March. [Downloadable!] (restricted)
  6. Sutter, Matthias & Kocher, Martin G., 2004. "Favoritism of agents - The case of referees' home bias," Journal of Economic Psychology, Elsevier, vol. 25(4), pages 461-469, August. [Downloadable!] (restricted)
    Other versions:
  7. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-26, December. [Downloadable!] (restricted)
  8. Daniel Nagin & James Rebitzer & Seth Sanders & Lowell Taylor, 2002. "Monitoring, Motivation and Management: The Determinants of Opportunistic Behavior in a Field Experiment," NBER Working Papers 8811, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. Duffy, John & Nagel, Rosemarie, 1997. "On the Robustness of Behaviour in Experimental "Beauty Contest" Games," Economic Journal, Royal Economic Society, vol. 107(445), pages 1684-1700, November. [Downloadable!] (restricted)
  10. Sutter, Matthias & Kocher, Martin & Strau[ss], Sabine, 2003. "Bargaining under time pressure in an experimental ultimatum game," Economics Letters, Elsevier, vol. 81(3), pages 341-347, December. [Downloadable!] (restricted)
  11. Rosemarie Nagel & Antoni Bosch-Domènech & Albert Satorra & José García Montalvo, 1999. "One, Two, (Three), Infinity: Newspaper and Lab Beauty-Contest Experiments," Economics Working Papers 438, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  12. Camerer, Colin F, 1997. "Progress in Behavioral Game Theory," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 167-88, Fall. [Downloadable!] (restricted)
  13. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Joep Sonnemans & Jan Tuinstra, 2008. "Positive Expectations Feedback Experiments and Number Guessing Games as Models of Financial Markets," Tinbergen Institute Discussion Papers 08-076/1, Tinbergen Institute. [Downloadable!]
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