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Nudging Backward Induction

Author

Listed:
  • William Neilson

    (University of Tennessee, Knoxville)

  • Michael Price

    (Georgia State University)

  • Mikhael Shor

    (University of Connecticut)

Abstract

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:

Suggested Citation

  • William Neilson & Michael Price & Mikhael Shor, 2016. "Nudging Backward Induction," Working papers 2016-31, University of Connecticut, Department of Economics.
  • Handle: RePEc:uct:uconnp:2016-31
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D60 - Microeconomics - - Welfare Economics - - - General

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