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

  • Kocher, Martin G.
  • Sutter, Matthias

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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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 61 (2006)
Issue (Month): 3 (November)
Pages: 375-392

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Handle: RePEc:eee:jeborg:v:61:y:2006:i:3:p:375-392
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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  16. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-26, December.
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  18. Payne, John W. & Bettman, James R. & Luce, Mary Frances, 1996. "When Time Is Money: Decision Behavior under Opportunity-Cost Time Pressure," Organizational Behavior and Human Decision Processes, Elsevier, vol. 66(2), pages 131-152, May.
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