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

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  • Kocher, Martin G.
  • Sutter, Matthias

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, as, 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

  • Kocher, Martin G. & Sutter, Matthias, 2006. "Time is money - Time pressure, incentives, and the quality of decision-making," Munich Reprints in Economics 18184, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:18184
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    More about this item

    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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