Cognitive Biases: Mistakes or Missing Stakes?

Arbeitspapier

Despite decades of research on heuristics and biases, empirical evidence on the effect of large incentives – as present in relevant economic decisions – on cognitive biases is scant. This paper tests the effect of incentives on four widely documented biases: base rate neglect, anchoring, failure of contingent thinking, and intuitive reasoning in the Cognitive Reflection Test. In pre-registered laboratory experiments with 1,236 college students in Nairobi, we implement three incentive levels: no incentives, standard lab payments, and very high incentives that increase the stakes by a factor of 100 to more than a monthly income. We find that cognitive effort as measured by response times increases by 40% with very high stakes. Performance, on the other hand, improves very mildly or not at all as incentives increase, with the largest improvements due to a reduced reliance on intuitions. In none of the tasks are very high stakes sufficient to de-bias participants, or come even close to doing so. These results contrast with expert predictions that forecast larger performance improvements.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 8168

Classification and Topics

• Classification: Wirtschaft ; Microeconomic Behavior: Underlying Principles
• Subject: cognitive biases ; incentives

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Enke, Benjamin ; Gneezy, Uri ; Hall, Brian ; Martin, David ; Nelidov, Vadim ; Offerman, Theo ; van de Ven, Jeroen
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/216564
• Last update: 10.03.2025, 11:44 AM CET