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

Listed author(s):
  • Martin G. Kocher
  • Matthias Sutter

    ()

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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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
Handle: RePEc:esi:discus:2004-05
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  1. Matthias Sutter & Martin G. Kocher, "undated". "Favoritism of agents – The case of referees’ home bias," Papers on Strategic Interaction 2002-28, Max Planck Institute of Economics, Strategic Interaction Group.
  2. Colin F. Camerer & Teck-Hua Ho & Juin-Kuan Chong, 2004. "A Cognitive Hierarchy Model of Games," The Quarterly Journal of Economics, Oxford University Press, vol. 119(3), pages 861-898.
  3. Güth, Werner & Kocher, Martin G. & Sutter, Matthias, 2002. "Experimental 'beauty contests' with homogeneous and heterogeneous players and with interior and boundary equilibria," Munich Reprints in Economics 18165, University of Munich, Department of Economics.
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  5. 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.
  6. 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.
  7. 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.
  8. Ho, Teck Hua & Weigelt, Keith & Camerer, Colin, 1996. "Iterated Dominance and Iterated Best-Response in Experimental P-Beauty Contests," Working Papers 974, California Institute of Technology, Division of the Humanities and Social Sciences.
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  12. Sutter, Matthias & Kocher, Martin G. & Strauß, Sabine, 2003. "Bargaining under time pressure in an experimental ultimatum game," Munich Reprints in Economics 18220, University of Munich, Department of Economics.
  13. Kocher, Martin G. & Strauß, Sabine & Sutter, Matthias, 2006. "Individual or team decision-making-Causes and consequences of self-selection," Munich Reprints in Economics 18162, University of Munich, Department of Economics.
  14. Daniel S. Nagin & James B. Rebitzer & Seth Sanders & Lowell J. Taylor, 2002. "Monitoring, Motivation, and Management: The Determinants of Opportunistic Behavior in a Field Experiment," American Economic Review, American Economic Association, vol. 92(4), pages 850-873, September.
  15. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
  16. Ching-to Albert Ma & Michael Manove, 1991. "Bargaining with Deadlines and Imperfect Player Control," Papers 0007, Boston University - Industry Studies Programme.
  17. Colin F. Camerer, 1997. "Progress in Behavioral Game Theory," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 167-188, Fall.
  18. Nagel, Rosemarie, 1995. "Unraveling in Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 85(5), pages 1313-1326, December.
  19. Wilcox, Nathaniel T, 1993. "Lottery Choice: Incentives, Complexity and Decision Time," Economic Journal, Royal Economic Society, vol. 103(421), pages 1397-1417, November.
  20. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
  21. Alvin E. Roth & Axel Ockenfels, "undated". "Last-Minute Bidding and the Rules for Ending Second-Price Auctions: Evidence from eBay and Amazon Auctions on the Internet," Papers on Strategic Interaction 2002-32, Max Planck Institute of Economics, Strategic Interaction Group.
  22. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  23. Tanga McDaniel & E. Rutström, 2001. "Decision Making Costs and Problem Solving Performance," Experimental Economics, Springer;Economic Science Association, vol. 4(2), pages 145-161, October.
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