Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/216564
Authors: 
Enke, Benjamin
Gneezy, Uri
Hall, Brian
Martin, David
Nelidov, Vadim
Offerman, Theo
van de Ven, Jeroen
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8168
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 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.
Subjects: 
cognitive biases
incentives
JEL: 
D01
Document Type: 
Working Paper

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