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Financial Incentives and Cognitive Abilities: Evidence from a Forecasting Task with Varying Cognitive Load

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  • Ondrej Rydval

    (Max Planck Institute of Economics, Jena, Germany.)

Abstract

I examine how financial incentives interact with intrinsic motivation and especially cognitive abilities in explaining heterogeneity in performance. Using a forecasting task with varying cognitive load, I show that the effectiveness of high-powered financial incentives as a stimulator of economic performance can be moderated by cognitive abilities in a causal fashion. Identifying the causality of cognitive abilities is a prerequisite for studying their interaction with financial and intrinsic incentives in a unifying framework, with implications for the design of efficient incentive schemes.

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Bibliographic Info

Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2007-040.

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Date of creation: 18 Jul 2007
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Handle: RePEc:jrp:jrpwrp:2007-040

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Keywords: Financial incentives; Cognitive ability; Heterogeneity; Performance; Experiment;

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Cited by:
  1. Duffy, Sean & Smith, John, 2011. "Cognitive load in the multi-player prisoner's dilemma game," MPRA Paper 30856, University Library of Munich, Germany.
  2. Chen, Chia-Ching & Chiu, I-Ming & Smith, John & Yamada, Tetsuji, 2011. "Too smart to be selfish? Measures of intelligence, social preferences, and consistency," MPRA Paper 34438, University Library of Munich, Germany.
  3. Ondrej Rydval, & Andreas Ortmann & Michal Ostatnicky, 2008. "Three Very Simple Games and What It Takes to Solve Them," CERGE-EI Working Papers wp347, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  4. Burnham, Terence C. & Cesarini, David & Wallace, Björn & Johannesson, Magnus & Lichtenstein, Paul, 2007. "Billiards and Brains: Cognitive Ability and Behavior in a p-Beauty Contest," Working Paper Series in Economics and Finance 684, Stockholm School of Economics.

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