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

Listed author(s):
  • 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, 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.

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Paper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 18184.

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Date of creation: 2006
Publication status: Published in Journal of Economic Behavior and Organization 3 61(2006): pp. 375-392
Handle: RePEc:lmu:muenar:18184
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