The effect of incentive structure on heuristic decision making: the proportion heuristic

Arbeitspapier

When making judgments, individuals often utilize heuristics to interpret information. We report on a series of experiments designed to test the ways in which incentive mechanisms influence the use of a particular heuristic in decision-making. Specifically, we demonstrate how information regarding the number of available practice problems influences the behaviors of individuals preparing for an exam (the proportion heuristic). More importantly the extent to which this information influences behavior depends critically on the way in which performance incentives are structured. In particular, relative compensation schemes magnify the influence of this heuristic while joint compensation schemes dampen its influence. We discuss these results with respect to the literature on effective compensation.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 2857

Classification and Topics

• Classification: Wirtschaft
• Subject: Entscheidung ; Heuristisches Verfahren ; Leistungsanreiz ; Test

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Oxoby, Robert J.
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/34321
• Last update: 10.03.2025, 11:43 AM CET