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

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  • 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.

Suggested Citation

  • Martin G. Kocher & Matthias Sutter, 2004. "Time is money - Time pressure, incentives, and the quality of decision-making," Papers on Strategic Interaction 2004-05, Max Planck Institute of Economics, Strategic Interaction Group.
  • Handle: RePEc:esi:discus:2004-05
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    References listed on IDEAS

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    Cited by:

    1. Marcela Ibanez & Simon Czermak & Matthias Sutter, "undated". "Searching for a better deal ? On the influence of group decision making, time pressure and gender in a search experiment," Working Papers 2008-05, Faculty of Economics and Statistics, University of Innsbruck.
    2. V. Rattini, 2016. "Managing the Workload: an Experiment on Individual Decision Making and Performance," Working Papers wp1080, Dipartimento Scienze Economiche, Universita' di Bologna.
    3. Buckert, Magdalena & Oechssler, Jörg & Schwieren, Christiane, 2017. "Imitation under stress," Journal of Economic Behavior & Organization, Elsevier, vol. 139(C), pages 252-266.
    4. Zhixin Xie & Lionel Page & Ben Hardy, 2016. "Investigating gender differences under time pressure in financial risk taking," QuBE Working Papers 045, QUT Business School.
    5. repec:eee:joepsy:v:60:y:2017:i:c:p:53-70 is not listed on IDEAS
    6. De Paola, Maria & Gioia, Francesca, 2016. "Who performs better under time pressure? Results from a field experiment," Journal of Economic Psychology, Elsevier, vol. 53(C), pages 37-53.
    7. Lindner, Florian & Sutter, Matthias, 2013. "Level-k reasoning and time pressure in the 11–20 money request game," Economics Letters, Elsevier, pages 542-545.
    8. Sonnemans, Joep & Tuinstra, Jan, 2010. "Positive expectations feedback experiments and number guessing games as models of financial markets," Journal of Economic Psychology, Elsevier, vol. 31(6), pages 964-984, December.
    9. repec:kap:jrisku:v:54:y:2017:i:1:d:10.1007_s11166-017-9252-4 is not listed on IDEAS
    10. Essl, Andrea & Jaussi, Stefanie, 2017. "Choking under time pressure: The influence of deadline-dependent bonus and malus incentive schemes on performance," Journal of Economic Behavior & Organization, Elsevier, vol. 133(C), pages 127-137.
    11. Meub, Lukas & Proeger, Till & Bizer, Kilian, 2013. "Anchoring: A valid explanation for biased forecasts when rational predictions are easily accessible and well incentivized?," Center for European, Governance and Economic Development Research Discussion Papers 166, University of Goettingen, Department of Economics.
    12. Andrew Caplin & Daniel Martin, 2016. "The Dual-Process Drift Diffusion Model: Evidence From Response Times," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 1274-1282, April.
    13. Marta Dyrkacz & Michal Krawczyk, 2015. "Exploring the role of deliberation time in non-selfish behaviour: the Double Response method," Working Papers 2015-27, Faculty of Economic Sciences, University of Warsaw.
    14. Shu-Heng Chen & Ye-Rong Du & Lee-Xieng Yang, 2014. "Cognitive capacity and cognitive hierarchy: a study based on beauty contest experiments," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 9(1), pages 69-105, April.
    15. Sutter, Matthias & Kocher, Martin & Strau[ss], Sabine, 2003. "Bargaining under time pressure in an experimental ultimatum game," Economics Letters, Elsevier, pages 341-347.
    16. Emin Karagözoglu & Martin G. Kocher, 2015. "Bargaining under Time Pressure," CESifo Working Paper Series 5685, CESifo Group Munich.
    17. Carlos Sáenz-Royo, 2017. "A plausible Decision Heuristics Model: Fallibility of human judgment as an endogenous problem," Working Papers 2017/04, Economics Department, Universitat Jaume I, Castellón (Spain).
    18. Young, Diana L. & Goodie, Adam S. & Hall, Daniel B. & Wu, Eric, 2012. "Decision making under time pressure, modeled in a prospect theory framework," Organizational Behavior and Human Decision Processes, Elsevier, vol. 118(2), pages 179-188.
    19. Johannes Leder & Leonhard Schilbach & Andreas Mojzisch, 2016. "Strategic Decision-Making and Social Skills: Integrating Behavioral Economics and Social Cognition Research," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 4(4), pages 1-14, November.
    20. Conte, Anna & Scarsini, Marco & Sürücü, Oktay, 2015. "Does time pressure impair performance? An experiment on queueing behavior," Center for Mathematical Economics Working Papers 538, Center for Mathematical Economics, Bielefeld University.
    21. repec:eee:gamebe:v:106:y:2017:i:c:p:188-208 is not listed on IDEAS
    22. Kai A. Konrad & Tim Lohse & Sven A. Simon, 2017. "Deception Under Time Pressure: Conscious Decision or a Problem of Awareness?," CESifo Working Paper Series 6671, CESifo Group Munich.
    23. Lindner, Florian & Rose, Julia, 2017. "No need for more time: Intertemporal allocation decisions under time pressure," Journal of Economic Psychology, Elsevier, vol. 60(C), pages 53-70.
    24. Jeremiah, Rupin, 2017. "DECISION EVALUATION OF INNOVATION OFFSHORING: Swedish R&D in India," SSE Working Paper Series in Business Administration 2017:3, Stockholm School of Economics, revised 07 Dec 2017.

    More about this item

    Keywords

    quality of decision-making; time pressure; incentives; beauty-contest experiment;

    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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