Cognitive Biases: Mistakes or Missing Stakes? / Benjamin Enke, Uri Gneezy, Brian Hall, David C. Martin, Vadim Nelidov, Theo Offerman, Jeroen van de Ven.

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Enke, Benjamin

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TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w28650.Publication details: Cambridge, Mass. National Bureau of Economic Research 2021.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: 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 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 response times - a proxy for cognitive effort - increase 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.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w28650 (Browse shelf(Opens below))	Not For Loan

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April 2021.

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 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 response times - a proxy for cognitive effort - increase 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.