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

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.

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Year of publication:	2004-01-13
Authors:	Kocher, Martin G. ; Sutter, Matthias
Institutions:	Max-Planck-Institut für Ökonomik <Jena> / Abteilung Strategische Interaktion
Subject:	Entscheidungstheorie \| decision theory \| Anreiz \| Experimentelle Spieltheorie \| Experimental Economics \| Zeitdruck \| Time Pressure

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Extent:	205824 bytes 30 p. application/pdf
Series:	Max-Planck-Institut für Ökonomik - Papers on Strategic Interaction Discussion Paper ; 0405 (2004)
Type of publication:	Book / Working Paper
Language:	English
Classification:	C72 - Noncooperative Games ; C91 - Laboratory, Individual Behavior ; Forecast, decision making ; Simulation methods ; Individual Working Papers, Preprints ; No country specification
Source:	USB Cologne (business full texts)