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Nudging Backward Induction

Listed author(s):
  • William Neilson

    (University of Tennessee, Knoxville)

  • Michael Price

    (Georgia State University)

  • Mikhael Shor

    (University of Connecticut)

A growing literature shows that interim incentives can help people achieve favorable long-term outcomes. We design a laboratory experiment to explore how interim incentives impact learning backward induction using a race game: Subjects play a simple game against a computer in which winning requires a sequence of correct moves. Our data highlight a perverse effect of incentives. Interim rewards inserted along the optimal path—nudges—help subjects learn patterns but crowd-out the skills required to solve a related game. Interim payments off the optimal path—teasers —can either help or hurt learning. JEL Classification: C91, D03, D60 Key words:

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File URL: http://web2.uconn.edu/economics/working/2016-31.pdf
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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2016-31.

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Length: 42 pages
Date of creation: Oct 2016
Handle: RePEc:uct:uconnp:2016-31
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University of Connecticut 365 Fairfield Way, Unit 1063 Storrs, CT 06269-1063

Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/

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